CHICAGO - Republic Industries Inc. estimates it will take three to six months to improve sales at its AutoNation used-car superstores and get the company's earnings back on track.
The nation's largest dealership group is blaming weak sales at its AutoNation stores for lower-than-expected earnings in the fourth quarter.
Last week Republic announced it would miss analysts' estimate of fourth-quarter earnings by 5 cents a share, blaming a weak used-car market. Analysts had estimated Republic would earn 27 cents a share in the fourth quarter.
'This is just a blip in the used-car business,' said H. Wayne Huizenga, co-CEO of Republic Industries, just before officially opening the first AutoNation USA store in the Chicago area. 'We'll make up the shortfall in 1999.'
Aggressive incentive programs on new vehicles have hurt the used-car business, particularly at superstores, which generally stock more expensive, late-model used cars. 'Used-car sales are not off significantly at our new-car dealerships,' said Mike Maroone, president of automotive operations and a former car dealer. 'At a new-vehicle dealership you get a lot more trade-ins and a lot more lower-priced cars.'
Republic has been trying to stock more older model vehicles at its superstores, but the inventory mix has not changed fast enough to bolster fourth-quarter results. 'We're trying to drive the price of our inventory down and create a bigger spread between new and used vehicles, but you can't change inventories overnight,' Maroone said.
Republic also announced $240 million in acquisitions. The company has agreed to acquire 10 dealership groups that are expected to add about $1.1 billion in annual revenue to Republic's operations.
The transactions will give Republic 31 more franchises in five states - California, Florida, Georgia, Illinois and Minnesota. After closing, Republic will have 380 franchises at 260 dealerships with pro forma annual revenues of just under $18 billion.
In a related development, Republic launched its previously announced joint venture with Ford Motor Co. involving eight Ford franchises and one Lincoln-Mercury franchise in Rochester, N.Y. Under the venture, known as 'Rochester Auto Collection,' Ford owns 51 percent of the Collection; Republic owns 49 percent and operates the stores.