AutoNation’s net profit in the second quarter surged by almost 10%

Article by Christian A., on July 20, 2012

The net profit of AutoNation Inc. in the second quarter surged by almost 10% to $78.6 million even as new-car margins fell and supplies of Japanese-brand vehicles had normalized. The largest dealership group in the country posted a net income of $78.6 million in the second quarter, higher than the $71.9 million recorded in the second quarter of 2011.

Its operating income climbed 14% to $164.2 million while the revenue rose by 17% to $3.9 billion, mainly boosted by a 29% rise in retail new-vehicle unit sales. CEO Mike Jackson said that the gain in new-vehicle unit volume resulted to the improvement in gross profit in AutoNation's new-vehicle, parts and service, and finance and insurance operations. He said that for the rest of the year, the outlook for industry sales is strong.

In a statement, Jackson said that the new vehicle sales will continue to increase. It’s also assumed that the industry new vehicle sales for 2012 will be in the mid-14 million units. He said that sales will improve with product launches that will be sped up, as well as with strong consumer credit and replacement demand. The overall U.S. economy continues to be slow but the U.S. light-vehicle demand has increased by 15% from January until June.

AutoNation's new-vehicle unit sales rose by 29% in the second quarter. This volume had pushed total gross profit from new vehicles to rise by 6%, on a same-store basis, to $145.2 million.

However, the gross profit per vehicle retailed declined to $2,173 – a decrease of nearly 18%. This decline in new-vehicle margins was anticipated due to the tough comparison with results during the past year when Japanese-brand vehicles faced shortages. As a result, prices went up. There was an 8% increase in used-vehicle retail unit sales but gross profits from retail used vehicles dropped 3% to $75 million. The parts-and-service gross profits rose by 3% to $252.8 million.

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