AutoNation Inc.’s net income dropped 28 percent in the second quarter as gross profit from new and used vehicles continued to decline.
Second-quarter net income was $272.5 million, a drop from $376.3 million in the year-earlier quarter. Revenue remained flat, at nearly $6.9 billion, for the Fort Lauderdale, Fla., company.
The country’s second-largest dealership group by new-vehicle sales took an after-tax charge of $12.4 million in the quarter because of weather-related losses, the company said Friday.
Shares of AutoNation fell 11 percent to $157.28 in afternoon trading.
CEO Mike Manley focused on AutoNation’s wins in areas such as a nearly 11 percent revenue jump in its service and parts, continuing a trend from the first quarter.
“We’ve been very intentional, I think, looking at areas where we can expand and grow to meet the transportation needs of our 11 million-plus customers in their households,” Manley said during the company’s second-quarter earnings call Friday. “We are commencing a much more targeted effort to engage with this customer base.”
AutoNation’s new-vehicle sales climbed 7.9 percent during the quarter, as inventory continued to increase, up to 26 days’ supply at the end of June. A year earlier, it was just 11 days’. Used-vehicle sales declined 11 percent in the most recent quarter.
Its gross profit per new vehicle dropped 25 percent to $4,607, while gross profit per used vehicle sold dipped 2.3 percent to $1,870.
The company acquired five dealerships in California in June and opened its 16th AutoNation USA used vehicle-only store, in Colorado Springs, Colo., continuing its expansion of the brand.
CFO Joe Lower said in February that the retailer had 20 additional AutoNation USA stores under development, with at least half that number slated to open in the next 12 months. Four opened during 2022, with plans to grow the division to more than 130 by the end of 2026. Two other outlets opened in the first quarter.
During the call, Manley said the company’s efforts to diversify offerings and reach customers in different ways will take time.
“A progressive expansion of our business isn’t a light switch because those customers that have become inactive are obviously transacting with someone else,” he said. “Maybe they’re getting a service or partner from a non-franchised family-owned store, but the reality is they are continuing to transact.”
In the long run, he said, building AutoNation’s service and parts and F&I offerings, among others, will pay off and reach those customers and others.
“All of that type of business adds stability in times where new vehicle sales are up or down and margins are really in the hands of someone else and [it] continues to lay down a base of profitability that enables us to develop great cash flow so that we can invest in these businesses,” he said.
Q2 revenue: $6.9 billion, flat from a year earlier
Q2 net income: $272.5 million, down 28 percent from a year earlier
Q2 vehicle sales: 131,256 combined new and used vehicles sold, down 2.8 percent. On a same-store basis, there were 128,481 combined new and used vehicles sold, down 4.4 percent.
Records: Second-quarter service and parts gross profit of $543 million and finance and insurance revenue per vehicle of $2,815
Ranking: AutoNation ranks No. 2 on Automotive News‘ most recent list of the top 150 dealership groups based in the U.S., with retail sales of 229,971 new vehicles in 2022.
