AutoNation Inc. plans to spend $200 million to $220 million to build 20 or more used-vehicle-only AutoNation USA stores over the next three years, following the launch of five stores in 2017 and 2018.
The auto retail giant, which made the announcement with its second-quarter financial results Thursday that set a record for adjusted earnings per share from continuing operations, will provide more information on the AutoNation USA rollout during a third-quarter earnings call, CEO Mike Jackson said in an interview.
"When we launched the USA stores we said we'd build five as pilot stores and then pause until we had a clear path to profitability, had paid our tuition and figured out what works and what does not work," he said. "And we're now through that and the stores are solidly profitable."
Lower expenses, digital tools, higher new-vehicle gross profit per unit and a turnaround in new- and used-vehicle sales late in the second quarter from a dismal April at the beginning of the coronavirus pandemic helped the nation's largest new-vehicle retailer more than double net income to $279.8 million, from $100.8 million a year earlier. Revenue dipped 15 percent to $4.53 billion.
Net income from continuing operations of $279.9 million included a noncash gain of $161 million after tax for the company's investment in online used-vehicle retailer Vroom, which launched its initial public offering last month.
Even without the investment gain, that measure of earnings would have risen 18 percent to about $119 million for the quarter.
AutoNation shares closed Thursday's trading up 7.6 percent to $52.55.
In early April AutoNation said it had placed about 7,000 employees on unpaid leave, cut executive pay and temporarily cut employee base pay, froze hiring, trimmed advertising costs by about half for the second quarter and postponed more than $50 million in capital expenditures. In June it told Automotive News that it would cut about 3,500 jobs permanently.
Last week, AutoNation said Cheryl Miller wouldn't return from a three-month medical leave and Miller, 48, resigned her position as CEO after less than a year and resigned from the board.
"The situation with Cheryl was completely unexpected. She was doing a terrific job and I miss her very much," Jackson told Automotive News. "We did a lot together for 10 years and I was very optimistic about her future."
AutoNation last week said Jackson's contract was extended from the end of 2021 to April 12, 2022. AutoNation plans to name a successor for Jackson, 71, in early 2022.
"In the midst of a pandemic with an unexpected situation with Cheryl, the board asked me would I step back into the CEO role and then the board asked me would I stay in the CEO role a bit longer," he said. "And then the board came to the conclusion or the very firm view that doing CEO succession in the midst of this global pandemic with all the unexpected things that will still happen until we get this pandemic behind us is no environment to do a CEO search, which I completely understand and agree with. So of course I said yes."
Records: All-time quarterly adjusted earnings per share from continuing operations of $1.41 and all-time, same-store finance and insurance gross profit per vehicle of $2,172.
Sales: New-vehicle sales tumbled 23 percent to 54,513. Used-vehicle sales fell 5.5 percent to 58,920.
Same-store sales: New-vehicle sales on a same-store basis dropped 21 percent to 54,512. That compares with a U.S. new light-vehicle sales decline of 33 percent during the second quarter, according to the Automotive News Data Center.
Used-vehicle sales on a same-store basis fell 3.5 percent to 58,910.
AutoNation, of Fort Lauderdale, Fla., ranks No. 1 on Automotive News' list of the top 150 dealership groups based in the U.S., with retail sales of 282,602 new vehicles in 2019.