On the stock market, and on the High Street for that matter, it has been a mixed year so far for retailers but one sub-sector that is really motoring is car dealerships.
Today’s upbeat trading update from Marshall Motor Holdings PLC (AIM:MMH) sent the share price sharply higher, extending the share price gain this year to 64%. Small wonder as the company has now raised full-year guidance three times in 2021.
And yet it is not even the best performing stock in the sub-sector; that accolade goes to Lookers PLC (LSE:LOOK), which is up 230% year-to-date.
Some of that is down to the company being let off with a slapped wrist by the Financial Conduct Authority in March over its sales processes in the first half of 2019 but something else is clearly going on in the sector.
Lookers said in its first-half trading update last week that it had delivered an excellent trading performance despite continued disruption and uncertainty caused by COVID-19.
Stop me if you have heard this before but it raised full-year expectations for profit before tax.
“This positive momentum has been driven by continued outperformance of the UK new retail car market combined with strong used volumes and margins, underpinned by Lookers' improved hybrid, omni-channel customer experience,” Lookers said.
Ah yes, the “omni-channel”, otherwise known as online sales supplementing good old car showrooms.
Talking of online sales, even Auto Trader Group PLC (LSE:AUTO), the UK’s largest digital automotive marketplace, has had a decent year with its share price up 10%.
That’s despite profit before tax in the year to the end of March slumping 37% to £157.4mln on revenue that was down 38% to £262.8mln from the year before, after the company waived advertising fees to its retailer customers in April, May and December of 2020 and February of this year.
Contrast that solid performance with Cazoo, the online car dealer set to list in New York through a SPAC takeover, which made a small profit in the second quarter of calendar 2021.
Cazoo is valued at US$7bn and Auto Trader at £6.3bn, so there is not much difference in valuations but a huge difference in how the companies are perceived by the market.
A common theme among the car dealers’ trading updates recently has been what Auto Trader described as “unusually strong demand and tight supply”.
It’s an indication of how dependent cars are now on technology that a shortage of semiconductors has affected new car production.
Motorpoint Group PLC (LSE:MOTR, OTC:MTPTF, FRA:1X4) (up 24% this year) said the shortage of new cars is expected to benefit sales of nearly new cars in the short term and “could result in a future headwind”.
For now, however, things are looking a lot brighter for car dealers than they were a year ago. Even today’s news that petrol prices are at their highest level for eight years suggests that, with travellers spurning public transport, Britain’s love affair with the car is still going strong.
Car dealerships (plus Auto Trader)
Company · Ticker · Share price · Consensus target price · % gain in 2021
Lookers PLC (LSE:LOOK) · LOOK · 68.45p · 99p · +226%
Marshall Motor Holdings PLC (AIM:MMH) · MMH · 231p · 259p · +64%
Vertu Motors (AIM:VTU) PLC · VTU · 45.95p · 96p · +39%
Cambria Automobiles PLC (AIM:CAMB) · CAMB · 81.5p · n/a · +39%
Pendragon PLC · PDG · 18.15p · 28p · 39%
Inchcape (LSE:INCH) PLC · INCH · 881p · 983p · +37%
Motorpoint Group PLC (LSE:MOTR, OTC:MTPTF, FRA:1X4) · MOTR · 355p · 438p · +24%
Caffyns (LSE:CFYN) PLC · CFYN · 450p · n/a · +17%
Auto Trader PLC · AUTO · 653.1p · 654p · +10%
FTSE 100 · IDX · 7,138 · n/a · +10%