UK car dealer Pendragon announced it would be cutting 22 stores and 300 staff after posting a pre-tax loss of £32.2m – down 188% from £32m profit last year.
The company said the faltering performance was due to a combination of issues, principally the level of unsold used car stock. Pendragon addressed this issue by releasing stock through a combination of lower retail pricing and clearance through trade auction channels.
“Economic and market conditions are very challenging,” read a Pendragon statement. “The heightened political and Brexit uncertainty, as to both outcome and timing, is adversely affecting customer confidence. We are not anticipating any improvement in this for the rest of our financial year and are closely monitoring market conditions and customer behaviour particularly during the important trading month of September.”
The company also commissioned a full market and operating model assessment of Car Store, confirming that 22 of 34 stores and one preparation centre would close, as they “do not have the required attributes to become profitable”.
At the remaining branches, Pendragon said outlined the key areas of short term focus: increasing stock turn to reduce vehicle depreciation; improving preparation efficiency; and improving ancillary profitability through selling additional products and processes.
Chris Chambers, non-executive chairman of Pendragon, said: “There has been a material decline in the Group’s profitability principally as a result of the actions taken to address excess used car stock. We made significant progress reducing this exposure in the latter period of the first-half and we remain committed to the strategy of growth in the Group’s used car proposition.
“The business is fully focussed on maximising performance, but we expect the market to continue to be challenging during the second half of 2019.”
The firm also announced Bill Berman, a non-executive director, would be running the business as interim executive chairman as Chris Chambers would be stepping down from the role on 1 October.
Chambers said: “I am firmly of the view that the company now needs an executive chairman who can dedicate the time and industry expertise that the company requires in these difficult markets.”