Tags: US | Earns | AutoNation

AutoNation: Worst Over as Sales Rise But Profit Drops

Thursday, 11 Feb 2010 01:38 PM

AutoNation Inc. logged an 8 percent sales increase in the fourth quarter, a sign that supports the company's contention that a recovery in auto sales is in progress.

The auto retailer, based in Fort Lauderdale, Fla., also said Thursday it expects industry sales to rise in 2010, even as Toyota's massive recall disrupts sales of the Japanese automaker's cars in the first quarter.

"The worst is over," Chief Executive Mike Jackson said in an interview with The Associated Press.

"We have a firm bottom and the recovery is under way."

But Jackson warned that recovery won't be rapid with unemployment, housing prices and credit still major issues keeping customers out of showrooms.

The company, which owns about 245 new-vehicle franchises in 15 states, said it expects total industry vehicle sales of 11.5 million this year, up from 10.4 million last year.

Jackson said the federal government's summer Cash For Clunkers incentive program helped to promote a psychological change in the marketplace.

"The consumer was sitting at home scared to death," Jackson said.

The downturn, Jackson said, forced to industry to change to a business model that's "more about viability, sustainability and profitability over the long term and I think that's much healthier."

AutoNation said Thursday its fourth-quarter earnings fell 8 percent despite better sales, after a large tax benefit boosted results in the previous year.

New vehicle sales rose 7 percent — the company's first year-over-year increase in new vehicle sales since the second quarter of 2005.

"Imagine, for the first time in five years, we had a year-over-year improvement in new vehicle revenue," Jackson said.

AutoNation executives also took an opportunity to comment on a series of massive recalls of Toyota's top-selling models over quality defects and safety concerns.

"Obviously sales in the first quarter will be disrupted by this whole thing, but I think in the second quarter Toyota will regain most of the share that it lost," Jackson said.

Chief Operating Officer Mike Maroone said added that Honda, Nissan and Ford have all benefited in both traffic and sales in the short term due to the Toyota's turmoil.

AutoNation has completed several thousand repairs for customers that were most concerned by the recalls. It also said that it plans to have all of its inventory repaired within a week to 10 days.

The impact on AutoNation's earnings is expected to be less than 1 cent per share in the first quarter, Jackson said.

For the quarter ended Dec. 31, AutoNation earned $61.7 million, or 35 cents per share, compared with $67.1 million, or 38 cents per share, a year earlier.

Excluding one-time items, adjusted income from continuing operations was $50 million or 29 cents per share, compared with $23 million or 13 cents per share in 2008.

Revenue rose 8 percent to $2.82 billion.

Analysts expected profit of 27 cents per share on revenue of $2.67 billion, according to a Thomson Reuters survey.

Its shares fell 37 cents, or about 2 percent, to $17.86 in midday trading.

The company said domestic segment income was $25.5 million compared with $15.5 million in the year-ago period, with an 6 percent increase in new vehicle sales. Income from imported vehicles rose to $41.2 million from $20.7 million last year, with an 8 percent jump in new vehicle sales. Premium luxury income was $48.4 million compared with $38.6 million a year ago, with an 8 percent increase in new vehicle sales.

For the full year 2009, AutoNation posted a profit of $198 million, compared with a loss of $1.24 billion a year earlier. Annual revenue fell to 10.7 billion from 13.2 billion the year before.

AutoNation said its performance was in part due to the company's ability to manage its inventories and trim structural costs. The company has been able to take about $150 million in costs out of the business, Maroone said.

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AutoNation Inc. logged an 8 percent sales increase in the fourth quarter, a sign that supports the company's contention that a recovery in auto sales is in progress.The auto retailer, based in Fort Lauderdale, Fla., also said Thursday it expects industry sales to rise in...
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Thursday, 11 Feb 2010 01:38 PM
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