Chris Holzshu: Yes. John, it’s Chris. I’m going to jump in on this and maybe just talk about the trend that we talked about in Q4, which was — I think the term I used was we were in a bit of a firefight trying to procure used cars back in Q4, which put a lot of pressure on margins in really the back half of 2023 and into the first couple of months in 2024. I think as our teams have kind of adjusted to ensuring that every vehicle that we can take in on trade generates about $1,800 more than a vehicle that we buy in auction, overall gross profit dollars, I think there’s a big focus. And we saw that trend continue to recover throughout Q1 both in GPUs, where I think we had the strongest GPU in March than we had the last 12 months.
And also on a same store comp basis. It was the first time in February that we saw a positive comp in same-store used cars in like 15 months or something like that. So I think we’ve kind of got our arms around this. It is very volatile. It is really finicky. But being a top of funnel used car dealer, obviously — or new car dealer, where we get first access to most trades is a huge benefit that we need to continue to capitalize on.
John Murphy: And then just one follow-up on partner service. Plus 3.2% is nothing to sneeze at, but it was a little bit lower than we were expecting. Do you foresee the ability to get a little bit deeper in the age spectrum and sort of broaden retention a bit to get that up into the mid-single digits? Or do you think as we’re seeing, Bryan, as you mentioned, the shrinkage or this very low 0 to 4 car population, it’s going to be challenged for the next couple of years?
Bryan DeBoer: John, this is Bryan. I think we’re really positive of what’s happening in aftersales. Most importantly, at 3.2%, when the car park is so much smaller as our main driver of the business, which is one to four year-old vehicles, if you think about the 10 million less units that are available for us to be up in same-store sales is big, which means we’re digging into older model vehicles, I think it also speaks volumes to the fact — and I think 3% is probably a low point of the next coming few years. But when we think about after sales growth, the complexity of vehicles is getting crazy, okay? Let alone the fact that it’s not just a BEV. Now we got BEVs in most manufacturers. We got plug-in hybrids. We got hybrids.
We got ICE engines. And all the products are new, meaning that there’s a higher breakage rate when there’s new products, okay? I mean, we’ve got the major advantage of longer warranty periods now, which is massive, okay? We’ve got the factory-trained technicians and, most importantly, the specialty tools that others can’t do. So the stickiness to new car dealers, we think, is a heck of a lot higher than what it was in the past and should bode well for us in the future regarding attachment and same-store sales growth.
John Murphy: Very helpful. Thank you.
Bryan DeBoer: Thanks, John.
Operator: Our next question comes from Rajat Gupta with JPMorgan. Please proceed with your question.
Rajat Gupta: Great. Thanks for taking the question. I just had a question on the U.K. business. We saw that the wholesale losses were once again very high in the first quarter, like $21 million gross profit loss. I mean, curious, was that all related to U.K. related inventory liquidation? Or was there something else going on? Just curious what happened there? And then how should we think about the inventory situation into the second quarter? Then I have a quick follow-up.
Bryan DeBoer: Yes. Rajat, this is Bryan. Most of our problems in the U.K., remember, were only Jardine and it happened in Q4. We worked through most of that in the United Kingdom. So most of those losses are relative to what’s happening in the United States.
Rajat Gupta: So what drove like the short wholesale loss in the first quarter? We didn’t notice that at other companies. So curious — or was it just like excess inventory into the regions? Or what drove the material change there versus the last quarter?
Bryan DeBoer: Yes. Look, I think the big thing was in January, we really tried to clean up inventory so we could go buy fresh inventory. And I think that’s what we saw. And Chris mentioned that we got the benefits of that coming out of those divestitures. So cleaning up inventory truly in the month was — at the first part of the quarter was the real disconnect. And now we’re starting to see some of those tailwinds coming in March and hopefully again in April.
Rajat Gupta: Got it. That’s helpful. And then we saw some press reports around headcount cuts in the U.K. Was that a part of a planned reduction when you announce Pendragon? Or was there something incremental given what’s going on in the region right now?
Bryan DeBoer: Yes. Rajat, let me jump in on that. This is Bryan again. We obviously have structured headcount reductions in the United Kingdom. I think everything is still pretty new and in flux there. So I think it’s premature to be able to figure out exactly what that’s going to look like. I think more importantly, we’re a sizable company today where, as a company, if we cut SG&A by 1%, it’s $50 million or $1.40 in EPS. I think where Chris, Adam and our operational teams are really focused today is how do they — how do we push that into the 3% to 5% range and save $150 million to $250 million after coming off some cuts over the last few years as well. And I think when we think about the Lithia & Driveway model, it’s about finding productivity increases that can come through technology and can come through just heavy lifting and rolling up our sleeves.
So that’s where we’re focusing the bulk of our efforts. And obviously, the U.K. will have their own efforts, but we really believe that there is a good 3% to 5% of fat that’s still in the store and would encourage each of our stores to continue to look for those opportunities.
Rajat Gupta: Got it. That’s helpful. Thanks for the color.
Bryan DeBoer: You bet, Rajat.
Operator: Our next question comes from Douglas Dutton with Evercore ISI. Please proceed with your question.
