AutoNation posted net income of $71.9 million in the second quarter

Article by Christian A., on July 26, 2011

AutoNation Inc., during the second quarter, increased profits in all business areas despite the supply constraints on Japanese-brand vehicles. Specifically, the country’s largest vehicle retailer recorded a net income of $71.9 million, an increase from $47.2 million during the same period last year. Revenue increased 8 percent to $3.3 billion while operating income rose 15 percent to $144.4 million.

The company’s Chief Executive Officer Mike Jackson credited the increases to strong new and used vehicle gross profit figures which were up 26 percent and 11 percent, respectively, on a per vehicle basis.

In addition, AutoNation posted higher profits in its parts and service as well as its finance and insurance businesses. The company recorded increases even with the dwindling availability of vehicles for its Japanese-brand stores.

Meanwhile, shortages are being resolved but will continue into the third quarter, Jackson stated. He forecasted that Japanese-brand car shipments decreased 40 percent below the planned levels in the second quarter.

In addition, it is forecasted to be 10 percent to 15 percent below planned levels by September. Moreover, Jackson disclosed that margins on cars from Japanese manufacturers benefited from constrained supply. The income of AutoNation’s import segment rose by 25 percent despite the 12 percent decline of new vehicle sales in the segment.

Jackson mentioned that while he foresees import-brand vehicle margins to remain strong in the third quarter, they will drop just like in the second quarter due to the improving supply environment.

Furthermore, the company forecasted that the new-vehicle sales environment will start to resume its normal operations in the fourth quarter. The company will continue to remain optimistic about the long-term recovery for the U.S. auto market, Jackson stated.

In the first three months of 2011, AutoNation was able to hike its net income by as much as 26 percent. Despite this huge surge, Autonation lowered its prediction for U.S. industry sales for the entire year (2011) no thanks to supply disruptions related to the disaster in Japan. It can be remembered that in March 11 this year, Japan was hits by a magnitude 9.0–9.1 undersea megathrust earthquake.

Known as the Great East Japan Earthquake, 2011 Tohoku earthquake, and the 3.11 earthquake, this natural disaster was regarded as the most powerful earthquake ever recorded in Japan. It even triggered tsunami waves reaching heights of up to 40.5 meters and traveled up to 10 km inland.

AutoNation expected industry light-vehicle sales in 2011 to reach up to 12.8 million although it reviased this forecast to the "mid-12 million" range. Jackson said that there are “significant reductions” in the shipments from Japanese carmakers until the end of the year.

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