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Car Retailers Say Sales Are Strong As Incentives Ward Off Downturn

July 26, 2002

Major auto retailers said sales remain strong as automakers' zero percent financing offers and other deals so far are countering the impact of the falling stock market, according to a Wall Street Journal story by Karen Lundegaard.

Reporting better-than-expected financial results for the second quarter, the retailers were upbeat about the outlook. Mike Jackson, chief executive of AutoNation Inc., the nation's largest new- and used-car retailer, said he initially was concerned about swooning equities, but July sales are equal to, if not above, those of July 2001.

Automakers' incentives, combined with many new models - "the magic formula," as Jackson called it -- are driving consumers into dealerships. The Fort Lauderdale, Fla., concern posted a 20 percent increase in net income to $103.8 million, or 32 cents a share, in the second period, boosted by strong sales and reduced interest costs.

After adjusting last year's results to exclude a gain and goodwill amortization, AutoNation said profit climbed 14 percent. Revenue rose 1.4 percent to $5.02 billion.

Net income at Houston-based Group 1 Automotive Inc. surged 36 percent to $19.1 million while earnings per share jumped 15 percent to 78 cents. The difference comes from a secondary

offering the company did late last year, which increased its shares outstanding. Revenue gained 2.7 percent to $1.03 billion.

Asbury Automotive Group Inc., which went public earlier this year, had net income of $12.8 million, or 37 cents a share, for the quarter. Revenue advanced 8.9 percent to $1.2 billion.

The results didn't improve the companies' sinking share prices, however.

Auto-retailing stocks have been hammered the past two months, along with the broader market, almost erasing all of the gains of the first part of the year.

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