AutoNation Q3 net income drops 9.5% to $107.3 million
AutoNation Inc.’s net income dropped 9.5 percent to $107.3 million in the third quarter as it sold fewer vehicles and suffered because of the Takata airbag recall and automakers’ sales incentive programs.
The profit declines came even as total AutoNation revenue rose 4.0 percent to $5.57 billion.
The Takata recall lowered net income by $6 million, AutoNation said today. The company said about 14 percent of its used-vehicle inventory was on hold at the end of September because of the Takata recall. That compares to roughly 20 percent at the end of June.
AutoNation CEO Mike Jackson called out automakers’ incentive programs for hurting results.
“Certain manufacturers continued disruptive marketing and sales incentives, which resulted in multi-tier pricing and were unfair for consumers as well as retailers,” Jackson said in a release. “In the third quarter, these incentives had a significant negative impact on new-vehicle volume and gross profit per new vehicle retailed.”
Same-store gross profits dropped in three of the company’s four business operations. The company saw its only same-store profit gain in the parts-and-service business, while same-store gross profits fell in new-vehicle, used-vehicle and finance-and-insurance operations.
AutoNation reported a 1.4 percent decline in total new-vehicle sales for the quarter to 88,322 vehicles. New-vehicle unit sales fell 6.2 percent on a same-store basis. That is worse than the 1.3 percent slide in new light-vehicle sales for the industry in the third quarter, which included fleet sales, according to the Automotive News Data Center.
Total used-vehicle retail sales dropped 2.8 percent during the quarter to 55,760 vehicles. Same-store used-vehicle retail sales dropped 6.9 percent.
As in the second quarter, the retailer’s parts-and-service operations were the main bright spot in the third quarter, posting a 6.3 percent gain in gross profit to $363.8 million. On a same-store basis, the parts-and-service gain was 1.8 percent.
During the quarter, income fell in all three of AutoNation’s reporting segments. Domestic-brand segment income slid 11 percent; import-brand segment income 7 percent; and luxury-brand segment income 5 percent.
AutoNation today also announced a major brand-extension initiative to invest more than $500 million over the next few years in building standalone used-car stores, expanding its collision and auction businesses, introducing self-branded parts and accessories and moving to no-haggle pricing for used vehicles.
The retailer also said it acquired three luxury franchises and one collision center, and was awarded three luxury-franchise additional points. Combined, those additions are expected to contribute $430 million in annual revenue once the add points are fully operational.
The acquisitions include:
- BMW of Vista, in San Diego, Calif., acquired in October; and
- Jaguar Bethesda and Land Rover Bethesda of Bethesda, Md. Those purchases are expected to close later this year.
The new points are BMW of Delray Beach in South Florida, Jaguar West Houston and Land Rover West Houston. All are expected to open in 2018.
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