Low interest rates and strong consumer confidence helped large public dealership groups report better-than-expected net earnings in the first quarter.
The public retailers' strong results are a reflection of the strength of auto retailing.
"It's a robust industry," said Sheldon Sandler, founder of Bel Air Partners, a Princeton, N.J., investment firm that brokers sales of privately held dealerships.
The public companies said greater inventory control in addition to lower floorplan interest costs gave their operations a boost, as well as a continued focus on higher-margin departments such as service and parts.
All said, they were in a strong position to acquire more dealerships. Group 1 Automotive Inc. of Houston, which has been the most conservative in its acquisition strategy, told of three agreements to acquire dealerships that will add $530 million in annual revenue. The agreements, valued at $85 million, include buying Miller Auto Group of Van Nuys, Calif., which has annual revenues of $400 million and will give Group 1 an entry to California. Here is a summary: AutoNation Inc., of Fort Lauderdale, Fla., reported net income of $91.7 million, up 53 percent from $59.9 million posted a year earlier, even though revenue declined 2 percent to $4.8 billion. The company said revenue slipped because the market for new vehicles dipped in the first quarter of 2002. Sonic Automotive Inc., of Charlotte, N.C., posted net income of $22.1 million, up 64 percent from $13.5 million a year earlier. Revenues were $1.6 billion, up 10 percent from $1.46 billion in 2001. It benefited from new accounting standards. Group 1 reported a 95 percent increase in net income to $16.2 million from $8.3 million a year earlier. Revenues topped $1 billion, up 24 percent. Lithia Motors Inc., of Medford, Ore., posted net earnings of $6.4 million, up 124 percent because of new accounting goodwill. Asbury Automotive Inc., of Stamford, Conn., the only company that did not report a jump in net earnings, faced one-time costs related to its initial public offering and a change in its tax status. The charge reduced first-quarter net income to $5.2 million from $6.7 million a year earlier. Without the charge, Asbury would have reported net income of $11.3 million, a 69 percent increase. Asbury's first-quarter revenues were $1.1 billion, up 8 percent.