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Three Dealer Groups Report Solid Q2 Profit Gains

July 24, 2012

AutoNation, Asbury and Sonic report solid second-quarter gains behind rising consumer demand and better credit conditions.

The 15 percent increase in new-vehicle sales in the second quarter, as reported by CNW Research, delivered solid profit gains for three of the nation’s largest dealer groups. One executive attributed the rise to increasing demand for new vehicles, an aging fleet and improving credit conditions.

Mike Jackson, chairman and CEO of AutoNation, said the pickup in new model introductions also helped drive consumers into showrooms. He said these factors combined should help new-vehicle sales reach the mid-14 million-unit mark this year.

 “We’re finding that the credit environment is very strong with low interest rates and ample credit availability,” Jackson said during the company’s July 19 investor call. “AutoNation is well positioned to capitalize on the recovery with an optimal brand and market mix and a disciplined cost structure.”

Second quarter net income rose 9.3 percent for the nation’s largest dealer group, while revenue for the quarter totaled $3.9 billion, up 17 percent from the year-ago period. New-vehicle sales were up 29 percent, while used-vehicle revenue rose 8 percent.

Gross profit per new vehicle, however, fell 18 percent to $2,172, while gross profit per used vehicle declined by 10 percent to $1,624. AutoNation’s F&I revenue increased 28.1 percent from the year-ago period, with F&I gross profit per retail unit rising 3.7 percent from a year ago to $1,282.

Asbury Automotive Group Inc. reported its second-quarter performance today, and revealed a 49 percent increase in net income for the quarter. Earnings for the Duluth, Ga.-based auto group reached $21.1 million, up from $14.2 million in the year-ago period.

Revenue for the dealer group increased 11 percent from a year ago to $1.19 billion, while new-car revenue increased 16 percent to $663.4 million. Asbury’s Used-car revenue for the quarter increased 7.1 percent to $339.1 million.

F&I revenues for the dealer group increased 21 percent to $42.8 million. F&I profit per new-vehicle sold increased 8 percent to $1,200. Combined with used and parts and sales services, the three segments account for 46 percent of Asbury’s revenue, but represented 79 percent of the company’s gross profit.

"Consistent with what we are seeing across our industry, retail margins continue to be under pressure as Japanese-branded inventory levels and sales volumes recover,” stated Asbury's Executive Vice President and COO Michael S. Kearney in a release. “However, we again demonstrated the diversity of our business by delivering growth in both F&I and parts-and-service gross profit."

Sonic reported its second-quarter performance on Monday, revealing a 32 percent increase net income. Revenue for the Charlotte, N.C.-based group rose 12.3 percent from a year ago to $2.19 billion. The company sold 34,396 new vehicles in the second quarter vs. 28,125 units a year ago, with the dealer group earning $28.2 million from the quarter.

Sonic’s retail sales for new vehicles increased 21 percent to $1.18 billion, while used-vehicle sales grew 4 percent to $550 million. The company sold a total of 36,026 new vehicles during the quarter, a 19 percent increase from a year ago. Used vehicle unit sales rose 2.7 percent to 27,528.

Gross profit per unit came in at $2,039, down from the second quarter of the previous year’s $2,347. The dealer group also reported that F&I revenue was up 18 percent.

Other dealer groups — Lithia Motors, Group 1 Automotive and Penske — are scheduled to announce second quarter earnings throughout the remainder of the month. <em>F&I and Showroom</em> will update the results as they become available.

 

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