Car dealer AutoNation 3Q profit falls, revenue up

AP News
Posted: Oct 28, 2010 12:14 PM
Car dealer AutoNation 3Q profit falls, revenue up

AutoNation Inc., the nation's largest automotive retailer, said Thursday its sales of new and used vehicles climbed more than 13 percent in the third quarter, but higher costs drove its net income down 12.5 percent.

The Fort Lauderdale, Fla., company reported net income of $56.9 million, or 38 cents per share, for the period ended Sept. 30. That's down from $65 million, or 36 cents per share, in the same quarter last year, which included the federal Cash for Clunkers rebate program.

Income from continuing operations rose to 39 cents per share, below Wall Street forecasts for earnings of 42 cents a share.

AutoNation, which owns more than 250 new-vehicle franchises in 15 states, said it had about $9 million in higher interest expenses during the quarter between buying back shares and higher inventory levels. Cost of sales rose nearly 15 percent to $2.73 billion, and its selling, general and administrative expenses grew 7.3 percent in the quarter to $402.9 million.

Revenue rose to $3.3 billion from $2.89 billion a year ago and sold 99,025 new and used vehicles during the quarter. Analysts expected revenue of $3.21 billion.

Its shares fell $1.16, or about 4.7 percent, to $23.64 in midday trading Thursday.

AutoNation said sales at stores open at least a year rose 1 percent. Total industry new vehicle unit sales fell 4 percent in the third quarter, according to data compiled by CNW Research that was cited by AutoNation.

"The company is performing very well in this recovery ... and we're very satisfied," CEO Mike Jackson said in an inteview with The Associated Press. "Credit has significantly healed and we have a better match between demand and credit."

The company said domestic segment income was $43 million compared with $33 million in the year-ago period, with a 15 percent increase in new vehicle sales. Income from imported vehicles fell to $51 million from $63 million last year, with a 3 percent decline in new vehicle sales. Premium luxury income was $48 million compared with $44 million a year ago, with a 3 percent increase in new vehicle sales.

For the year, AutoNation said it expects industry new vehicle sales of about 11.5 million units.

While most believe the auto industry's recovery is under way, Americans' enthusiasm for new cars and trucks have cooled in recent months on worries about the economy, signaling that the recovery is far from certain.

But automakers are still predicting a gradual recovery in the last half of the year, improving from the historic low of 10.4 million last year, but still well below the record high of more than 17 million in 2000.

"It's going to take longer to get back to where we were than it did to crash," Jackson said, estimating about a four-year recovery time, versus the two-year industry decline.

The company also said it was seven Fiat franchises and would be the largest Fiat dealer in the U.S. with locations in California, Colorado, Arizona, Washington state, Virginia and Georgia.

Mike Maroone, AutoNation's cheif operating officer, said the company is very excited about the franchises and believes the demand for the Fiat brand will be beneficial. Maroone said the Fiat 500 minicar is fun and well-built, is estimated to sell for between $15,000 and $16,000, and get about 40 miles per gallon.