Dealer groups report gains in Q1 profits
Photo credit: Bloomberg
DETROIT -- The nation's largest auto dealership groups, boosted by U.S. customers buying fuel-efficient vehicles in response to high gasoline prices, are reporting gains in first-quarter profits.
AutoNation Inc., the largest U.S. dealership group, today reported net income of $73 million in the first three months of 2012, up 5.1 percent from a year earlier. Revenue rose 10 percent to $3.7 billion.
On Monday, No. 3 Sonic Automotive Inc. said earnings from continuing operations rose 24 percent while net income surged 37 percent.
"We feel higher gas prices are accelerating sales, not hurting sales," AutoNation CEO Mike Jackson said on CNBC this morning. "The industry has gone all-in on efficiency on all vehicles, and people are walking in and see they don't have to give up on size or performance to get 20 percent [better] fuel efficiency."
AutoNation said stronger new-vehicle sales led to its 10 percent increase in revenue, to $3.7 billion. AutoNation's new-vehicle unit sales rose 8 percent on a same-store basis and 10 percent overall, the company said in a statement.
Overall U.S. light-vehicle sales improved 13 percent in the quarter.
Even with higher fuel prices this year, sales of both cars and trucks will continue to recover, Jackson said, because manufacturers have improved fuel economy across vehicle segments. Of all vehicles sold during the first quarter, 75 percent had fuel economy ratings of more than 25 miles per gallon, according to AutoNation. Forty percent were rated at more than 30 miles per gallon.
Penske said it posted its most profitable first quarter ever, piling up net income of $46.8 million, compared with net income of $33.9 million a year earlier. Revenue rose 17.9 percent to $3.2 billion. Penske said retail sales rose 18 percent in the United States and Britain.
CEO Roger Penske said that despite a weakening economy in Europe, Penske's European stores, located mainly in Britain, did well in the first quarter.
"In light of perceptions surrounding our international markets, I am particularly pleased with the performance," CEO Roger Penske said in a statement. "During the first quarter, our international-based same-store retail revenue increased 5.9 percent."
At Lithia, net income rose to $16.8 million from $8.7 million during the same quarter last year. Total revenue surged 30 percent to $759 million.
"We remain focused on consistent execution of our operational strategies," Lithia President Bryan DeBoer said in a statement. "Our first-quarter results build on our momentum from 2011."
Analysts say numerous factors are driving the growth of auto sales and dealership group profits. In a report this week, analysts at Wells Fargo cited:
Record vehicle age and replacement demand.
Healthy used car trade-in values.
Finance availability and more aggressive lease terms.
Stepped-up new product introductions and improved fuel efficiency.
Growth in number of licensed drivers.
Improved consumer confidence.
"Our estimates incorporate conservative (U.S.) industry unit sales assumptions of 13.5 million for 2012 and 14.0 million for 2013," the report said.
Philip Nussel, Amy Wilson, and Reuters contributed to this report.