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RICHMOND — AutoNation Inc., the nation's largest auto dealership chain, said Friday that its second-quarter profit fell 29 percent as consumers bought fewer cars in a stressed economy, but remained optimistic that the industry is beginning to stabilize.
AutoNation CEO Mike Jackson said new vehicle sales are likely to improve due to the "cash for clunkers" program designed to encourage consumers to replace aging and fuel-inefficient cars with new ones.
Jackson said the company will increase its inventories in "a disciplined manner" to meet the budding demand for new vehicles in the second half of the year. AutoNation has been managing its orders for new vehicles to keep inventory in line with weak demand and has made about $200 million in structural cost reductions.
AutoNation said it earned $36.7 million, or 21 cents a share, in the three months ended June 30. That's down from $51.8 million, or 29 cents a share, a year ago.
After adjusting for special items, the Fort Lauderdale, Fla.-based company said it would have earned 29 cents a share from continuing operations. That is 5 cents above the analyst forecast of 24 cents a share, according to a survey by Thomson Reuters. Those estimates typically exclude one-time items.
AutoNation, which owns about 250 new-vehicle franchises in 15 states, said it experienced losses from discontinued operations primarily from franchise and property impairments. As of June 30, the company said it has sold or closed 21 locations, including seven Chrysler dealerships.
Revenue fell 28.7 percent to $2.61 billion from $3.66 billion in the same quarter a year ago. Analysts expected $2.8 billion in revenue.
"Clearly our productivity and cost-saving drive enabled us to deliver an absolutely solid profitability in the second quarter," Jackson said in an interview with The Associated Press. "For this tough environment, to be able to put up that type of number is a very satisfying result."
Shares of AutoNation rose 5 cents to $20.68. Over the previous 52 weeks, the stock traded between $3.97 and $21.33.
Sales of new vehicles at AutoNation stores fell 38 percent during the quarter, but the company said it fared better than its peers. Industrywide, new vehicle sales fell about 40 percent, the company said, citing data compiled by CNW Research.
For the quarter, the company said domestic segment income was $26 million compared with $33 million in the year-ago period, with a 34 percent decline in new vehicle sales. Income from imported vehicles declined to $42 million from $57 million last year, with an 41 percent drop in new vehicle sales. Premium luxury income was $43 million compared with $52 million a year ago, with a 34 percent slip in new vehicle sales.
Jackson said government efforts to aid the industry in its recovery are helping. The "Cash for Clunkers" program brought a 36 percent surge of traffic and the Treasury Department's program to ease the credit market will improve conditions.
"You were in a downward spiral and every quarter was worse than the quarter before and you didn't know where the bottom was going to be," Jackson said. "Clearly we found stabilization in the second quarter. ... and now the industry is positioned for a gradual recovery."
But the "Cash for Clunkers" program may be running out of money after only a matter of days as car shoppers flocked to dealerships to take advantage of the rebates.
Democrats in the House were exploring the possibility of votes as early as Friday on legislation pouring an additional $2 billion into the car purchase program. The Senate was not scheduled to vote on Friday but lawmakers hoped to win approval for more funding next week.
Reps. Sander Levin, D-Mich., and Betty Sutton, D-Ohio, said lawmakers from the two states were assured by Transportation Secretary Ray LaHood that the program would continue while the Obama administration looked for more money.
At the White House, press secretary Robert Gibbs sought to assure consumers that the program is still running and will be alive "this weekend."
"If you were planning on going to buy a car this weekend, using this program, this program continues to run," Gibbs told reporters. He would not commit to any timeframe beyond that.
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AP Auto Writer Kimberly Johnson in Detroit contributed to this report.
