Buy/Sell Market Setting Records, Ford Pro Architect Retires, Discretionary Spending On The Rise

Is it already the end of another week? We’re looking back this morning as we look at buy/sell activity from the first half of the year, reflect on the legacy of Ford Pro CEO Ted Cannis, and dig into how discretionary spending is on the rise.

• The first half of 2024 has shattered records in the dealership buy/sell market. With 204 dealership transactions completed and 381 franchises sold, this is nearly double pre-pandemic levels. So, what’s fueling this surge?
  • Blue sky values are up 74% from pre-pandemic, driving sellers to cash out.
  • Despite a 35% drop in average earnings, consolidation continues strong as multi-dealership sales (55 transactions) account for 27% of the market.
  • Public dealer groups have $7.4B in capital, driving the frenzy.
  • Shout out to all of our friends at Lithia & Driveway, Morgan Auto Group, Ciocca Automotive, Ourisman Automotive Group, Nucar Family of Dealerships, Hudson Automotive Group, Premier Truck Group, just to name a few of the many auto groups who have gained new partners this year.
  • A Kerrigan Advisors report reveals, "This unprecedented market activity highlights the industry's ongoing transformation."

• Ted Cannis, CEO of Ford Pro and key architect of Ford's commercial vehicle division's success, is set to retire at the end of September. His leadership helped Ford Pro become a $70 billion business within just a few years.
  • Cannis led development of the Mustang Mach-E and had key roles in Ford's overseas operations.
  • Ford Blue President Andrew Frick will serve as interim Ford Pro CEO while a replacement is sought.
  • Ford Pro’s earnings forecast was raised by $1 billion, expected to reach $9-$10 billion for 2024.
  • CEO Jim Farley praised Cannis’ role in driving Ford Pro’s success and technological growth.
  • Cannis emphasized Ford Pro’s unmatched scale, service, and dealer network, saying "Leading Ford Pro has been the most thrilling chapter of my career, and I’m excited to see its continued growth."
• Despite continued economic uncertainty and consumer caution, discretionary spending is beginning to show signs of recovery in certain sectors. While overall non-discretionary spending remains strong, discretionary categories like apparel, home goods, and electronics are seeing early signs of a rebound.
  • A Deloitte survey found that discretionary spending was down 18.6% from 2021, while non-discretionary spending rose by 3.3%.
  • Discounters like Dollar General and Ross Stores report that their customers remain focused on necessities, with discretionary spending still soft.
  • However, some categories, including apparel and home improvement, are seeing renewed consumer interest ahead of the holiday season.
  • Target reported a 9% jump in beauty sales during Q2, and Best Buy saw a 6% year-over-year increase in computer and tablet sales.
  • KPMG’s Duleep Rodrigo highlighted positive spending trends in areas like tr

Hosts: Paul J Daly and Kyle Mountsier

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Transcript

Kyle Mountsier: 0:10

Are you kidding me? It's the end of the week. You made it. What is this? Fourth co host for the week in Jordan, Cox hanging out glasses on the face. Let's talk about some stuff. It's Friday, y'all,

Jordan Cox: 0:22

it's Friday, right? Yay, who I is and who Id they stop this day when they see me. Oh, man, we made it. Look

Kyle Mountsier: 0:31

up there, there, came, came back. Look Friday. Let me tell you about it. Let me, let me tell you about Jordan. We were just chatting this up. But listen, I don't know if you know, but Paul and I have been doing this podcast for how many, like, some something like, in the 800 plus range of this podcast for the last three years, right? And like by and large, we rarely are not together on the podcast for more than, like, two days, and then, like, twice a year, we both go on vacation on separate times. It's gotten real weird. The last few weeks we were at the name ad conference. We were doing podcasts on, you know, in weird spots, and then I was on vacation, and he's on vacation and like, I mean, it's just been real weird, but I'm glad you're here. I'm pumped. I'm excited. Oh,

Jordan Cox: 1:29

man, it's great. Thanks for having me on here. I mean, what? It's gonna be somewhat back to normal next week, I think so. Thanks for listening. Last one with you. Yeah,

Kyle Mountsier: 1:39

I'm excited. Actually, next week, we are, Paul and I are headed to the welcome conference, which was will gadares conference. The things sold out in like, less than 24 hours. We had no clue what to do, but luckily, we know some people, and so we we've finagled our way into that thing. And so we're going to be hanging out with will and a whole bunch of his friends in New York City on Monday. So we'll try and bring everybody some content from that. Man. We had a great webinar yesterday. You should check that out. Go to our LinkedIn or go to asotu com, find that webinar on just something that doesn't get talked about a lot. So, yeah, yeah, that's what we got going on. But we got

Jordan Cox: 2:18

the final in the dirt stuff going out today. We got two more that are dropping today. We don't have the like, it's like, just go to YouTube, check it out. You'll see the two final ones. They're great,

Kyle Mountsier: 2:29

yeah, yeah. You can go to asotube, A, S, o, t, u, dot, B, E, and you'll get all the content. And when I say all the content, I mean all the content, all of it, all. Right, let's get into it. So let's do our first tour today. We're looking at a little report that comes out every so often, every quarter, I think, and looks like the first half of 2024 has yet again shattered, buy, sell records, with 204 dealership transactions completed, totaling 381 franchises sold, nearly double pre pandemic levels. So what is fueling this surge? Blue Sky values are still up 74% from pre pandemic, driving sellers to cash out. So there's a lot of sellers that are just trying to cash out on that legacy fund. Despite a 35% average drop in average earnings, consolidation continues as strong multi dealership sales. 55 of those 204 transactions were multi dealership sales account for 27% of the market. Public dealer groups have $7.54 billion in capital they're just ready and willing to spend, which is driving the frenzy a lot. We got some friends at lithium driveway, Morgan Auto Group, sioka, Osman, new car, Hudson, Premier truck group, to name a few that have gained new partners this year, Kerrigan advisors report revealed the unprecedented market activity highlights the industry's ongoing transformation. We've talked to Kerrigan, we've talked to Haig, all about this consolidation, and it is at a clip right now.

Jordan Cox: 4:10

It's surprising how many on the list we saw that are our friends. That's what blew my mind. I went through and saw the graphic I forget when it was like earlier this morning, and I was like, man, there's a lot of people. There's a lot of stores that we know, and people in those stores that blows my mind, and good for them.

Kyle Mountsier: 4:28

Yep, yeah, it's, it's, it's, it's really neat to see like these stores. I mean, I love like that. The Apple automotive transaction to seoca earlier this year. That was in February. We covered that. Obviously we, we know Greg CEO well, and love what he's doing growing at a clip. I mean, he I remember standing in, this was just a couple of years ago. We were standing in his showroom or in his service drive, and I remember him saying to me, he was like, we just got to 53 and don't worry, 100 here. We. Come and he's making good on his promise. So there's a lot out there. You know, I think that the the question here, for me is, is, how, as we rapidly accelerate the pace of consolidation, do we still maintain the benefits of the local field of dealership while also experiencing the benefits of the efficiency at the group level as margins are compressing, and I think compressing, and I think some of the public groups are proving that that is quite possible. Yeah, exactly.

Jordan Cox: 5:29

I mean, there's got to be value to why they need to buy it, but also not lose that small hometown feel. Yep,

Kyle Mountsier: 5:36

no segue for this one, but the TED Canis and key architect of Ford's commercial vehicles division, success is set to retire at the end of September. Ted is well known in the foreign organization. He helped leadership at Ford pro become a$70 billion business within just a few years. It's pretty new business entity for them. Candace also led the development of the Mustang Mach E and had key roles in Ford's overseas operations. Currently, Ford blue president, Andrew Frick will serve as the interim Ford pro CEO while they are looking for a replacement. Jim Farley praised candace's role in driving Ford pro success and technological growth, and Candace emphasized Ford Pro's unmatched scale service and dealer network, saying leading Ford Pro has been the most thrilling chapter of my career. I'm excited to see its continued growth. Look, if you don't know what Ford Pro and the commercial division of Ford is up to like you're missing it, because they have been forced to be reckoned with over the last few years, especially,

Jordan Cox: 6:42

they've done such a great job at that. I mean, even if you think about how they've integrated so many of the new lineup within the commercial side, like that blows my mind. If you look at the f1, 50 lightning, they were able to make that possible. They made it at a cheaper price point, like that, like stuff like that. Other manufacturers should look at and follow suit on,

Kyle Mountsier: 7:04

Yep, yeah, I and even just the fact that their commercial division has started to, you know, I mean, so many four dealers have have commercial divisions, but it's crossing over into like deal dealership operations with their fleet services, like internal fleet services for pick, for service, repair and fleets. So that commercial division goes more than just like strict commercial sales and fleet sales,

Jordan Cox: 7:32

yeah for sure.

Kyle Mountsier: 7:33

Let's see. Speaking of spending some money, making some money, stop segway time, looks like discretionary spending is starting to show some signs of recovery, while overall non discretionary spending remains strong. Discretionary categories like apparel, Home Goods and electronics are seeing early signs of a rebound. This is good because some some people like to spend discretionary funds on auto. Deloitte Survey recently found that discretionary spending was down 18.6 from 2021 while non discretionary spending rose by 3.3 discounters like Dollar General and Ross Stores report that their customers remain focused on necessities, with discretionary spending still soft. So there, there are things like Target seeing beauty sales jump 9% Best Buy seeing a 6% year over year increase in computer and tablet sales. So there's some like micro segments and some small segments coming back in some say in some areas, but still discretionary spending low because of low, just funds in the bank at this point. So, but I'm, I'm definitely on the bright side of this. I'm seeing, like, more reports that people are buying stuff, which is good because it's way before Christmas time.

Jordan Cox: 8:57

Yeah, exactly. I think that's only to be strong going into, you know, the rest of September, obviously, we're moving towards big retail months, whether it's October or December, there's really some big opportunities to see that entire automotive retail and then also retail industry come back strong. It's going to be really interesting to see where everything lands mid November.

Kyle Mountsier: 9:21

Yeah. I mean, the retail industry has a lot of question marks coming up. If you haven't watched or listened to the wheelhouse, there's an episode coming out soon that I got to be a part of recording a little bit of the section there, of the of it, but just talking about, like, what consumers and what dealers should be looking to add in Q for and we're going to really be questioning, like whether or not consumers are ready to come back deeply into that discretionary category, you know, and non discretionary category items, as far as purchases, which impacts auto as well,

Jordan Cox: 9:57

it's only up from here. Hey, look, I. That's

Kyle Mountsier: 10:00

all we got time for on a Friday, it's been a crazy week. It's been a fun week. We've had a bunch of hosts thanks to man, Steve Greenfield, Daniel Gover, Michael Cirillo and Jordan Cox. They all love people more than you love cars. You should too. Let's go

Unknown: 10:22

deep.