RICHMOND, Va. - AutoNation Inc. said Thursday that its second-quarter net income rose 9.3 per cent as the nation's largest dealership chain sold more new and used vehicles.
CEO Mike Jackson said that the strong new vehicle sales environment is supported by demand from customers who want to replace aging cars that they held onto during the recession and by a healthy credit environment.
"There are strong drivers that plow right through the economic difficulties or high gas prices," Jackson said in an interview with The Associated Press.
"The fundamental (driver) is there's a genuine replacement need. The vehicles on the road in America are old and worn out ... So the consumer has to make a choice, are you going to spend a lot of money fixing this old, tired vehicle, or do you want to come in and buy something new. They have to do something."
Jackson said he expects industry new vehicle sales to reach mid-14 million units in 2012. While that's still below the 17 million of the mid-2000s, it's a far cry from the industry's downturn in 2009, when 10.4 million vehicles were sold.
"I think we're on the journey back to 16 million units. The only question is the pace with which we get there," Jackson told investors in a conference call.
Its results beat Wall Street expectations. But after rising to their highest level since 1997 in morning trading, shares tuned lower and were down almost 4 per cent in afternoon dealings.
Sterne Agee analyst Michael Ward said AutoNation's stock has had a "pretty good run over the last two or three weeks" and with positive financial results on Thursday, investors may have been inclined to "sell on the news."
The company, based in Fort Lauderdale, Fla., said its net income rose to US$78.6 million, or 64 cents per share for the three-month period ended June 30, up from $71.9 million, or 49 cents per share, a year earlier. On an adjusted basis, it earned 66 cents per share, beating Wall Street estimates of 59 cents per share.
AutoNation, which owns 260 new-vehicle franchises in 15 states, said revenue increased 17 per cent to $3.9 billion. Analysts polled by FactSet expected revenue of $3.71 billion.
Sales of new vehicles, AutoNation's largest division, increased 29 per cent in the quarter. The company's used vehicle revenue rose 8 per cent.
However, gross profit per new vehicle fell $466, or nearly 18 per cent, to $2,172 and gross profit per used vehicle declined $176, or about 10 per cent, to $1,624.
Total industry new vehicle sales increased 15 per cent in the second quarter, according to data compiled by CNW Research that was cited by AutoNation.
During the quarter, AutoNation's import segment, which is comprised of Toyota Motor Corp., Honda Motor Co., Nissan Motor Co. and Hyundai, posted a 44 per cent unit sales increase. Japanese automakers struggled had last year after the March earthquake and tsunami shut down production and cut off supplies of key parts.
AutoNation said domestic unit sales, which includes vehicles made by General Motors Co., Ford Motor Co. and Chrysler Group LLC, increased 17 per cent. Its primary luxury brands, which include Mercedes-Benz, BMW AG and Lexus, saw new unit sales increase 16 per cent.
After rising as high as $43.72 in morning trading, a level last seen in January 1997, Autonation shares dropped $1.67, or 3.9 per cent, to close at $40.78 Thursday.
During the quarter, AutoNation spent $126.2 million to buy back 3.7 million shares of stock. The company also said its board on Thursday authorized the repurchase of up to an additional $250 million of AutoNation stock, bringing its total remaining share repurchase authorization to about $368 million.
Michael Felberbaum can be reached at http://www.twitter.com/MLFelberbaum.