AutoNation Inc. said second-quarter profit surged, as the
nation's largest dealership chain rode a car-sales boom expected to
reach the highest levels in more than a decade.
The Ft. Lauderdale, Fla.-based company reported a second-quarter
profit of $115.1 million, or $1 per share, up more than 14% from
$100.4 million during the same timeframe a year earlier.
AutoNation's revenue rose more than 9% to $5.2 billion amid
rising new-vehicle sales and strong results across other business
segments, including used-vehicle sales, parts and service and
finance and insurance. The company said net income from continuing
operations hit a record.
Still, AutoNation's results missed Wall Street expectations.
Analysts polled by Thomson Reuters expected AutoNation to earn
$1.02 per share.
AutoNation's rising profits reflect low interest rates and gas
prices that are spurring a torrid pace for auto sales. AutoNation
Chief Executive Mike Jackson said the company expects new-vehicle
sales to surpass 17 million for the full year, a level not seen
since 2001. The dealership chain's new-vehicle sales rose 6% during
the second quarter, bringing in nearly $3 billion in revenue.
With interest rates low, dealerships are able to offer
longer-term financing, broadening the range of buyers who can
afford a new car. Lower gas prices, meanwhile, are padding
consumers' pockets.
Lower fuel prices are also spurring consumers to buy larger,
less-efficient pickup trucks and sport-utility vehicles that
typically deliver higher margins for auto retailers than passenger
cars. Light-truck sales were up 9% during the second quarter,
according to Wells Fargo & Co.
AutoNation also cited broader pent-up demand for new cars, with
the average vehicle on U.S. roads more than 11 years old.
Mr. Jackson said AutoNation completed six months ahead of
schedule the first phase of an online program called AutoNation
Express that allows customers to reserve and put deposits down on
vehicles. More than 20% of the dealership chain's sales were
generated from websites during the first half of 2015, he said.
Mr. Jackson made waves earlier this month when he cut ties with
TrueCar Inc., an online car-buying site. Mr. Jackson hopes to
bolster AutoNation's online shopping capabilities to reduce
reliance on third parties on sales and cut down on time spent in
the dealership.
AutoNation is also on the front lines of widespread safety
problems affecting the U.S. auto industry, especially with vehicles
featuring rupture-prone air bags manufactured by Takata Corp. of
Japan. The dealership chain completed more than 20,000
Takata-related recalls in the second quarter. The company expects
over the next several years to replace an additional 400,000 air
bags at AutoNation dealerships.
Mr. Jackson reiterated his support for the terms of a settlement
between American Honda Finance Corp. and the Consumer Financial
Protection Bureau and U.S. Justice Department on allegations of
discriminatory lending practices. He has called the terms, which
involve capping dealers' markup of interest rates, a "workable
template" that other car retailers should follow.
Write to Mike Spector at mike.spector@wsj.com
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