WEDA Survey: Dealers Feel Financial Squeeze

Declining equipment sales coupled with increasing expenses is keeping the pressure on equipment dealers’ bottom lines.

While North American farm equipment dealers showed improvement last year in financial and operational performance, there were signs of distress, according to data compiled by Equipment Dealer Consulting, P.C., the firm that published the 2017 Cost of Doing Business (CODB) study on behalf of the Western Equipment Dealers Association (WEDA).

Curt Kleoppel, president of Equipment Dealer Consulting, reported an increase in total dealer equity from 0.6 percent in the 2016 study to 0.71 percent in 2017. He also said total inventory as a percent of assets decreased 2.23 percent. That’s the good news.

He noted, however, an escalation in overall expenses and a drop in total profits from operations. From 2014 to 2017, dealers’ average sales fell by more than 11 percent, although the rate of decline slowed in 2017.

Meanwhile, from 2015 to 2016, on average, expenses rose by nearly 9 percent, and that trend appeared again in the 2017 study. As a percent of total sales, total expenses rose to 15.5 percent in the latest study. This is up from 14.2 percent in the prior year and 11.8 percent in 2014.

The 2017 study also shows that total salaries and benefits at dealerships grew from 6.25 percent to 8.12 percent as a percent of sales during the past four years. That’s an increase of nearly 30 percent. The average headcount at dealerships rose from 17.8 employees per store location in 2014 to 19.3 in the most recent study.

Rising healthcare costs could also be contributing to higher costs.

This year’s survey involved 203 dealers representing approximately 672 locations.

Source: Dave Kanicki, Farm Equipment