Some interesting tidbits in the earnings call.
– AutoNation retailed 73, 500 new vehicles on a same-store basis, down 13%, compared to the period a year ago. But favorable compared to the industry that, according to CNW Research, was off 16% at retail on the quarter. Used vehicle results were favorable relative to new. They retailed just under 50,000 units in the quarter, 4% less compared to a year ago. Inventory at June 30th reflects a new vehicle day supply of 62 days. This represents an increase of seven days compared to a year ago, it reflects the slower sales pace in May and June and compares favorably to the industry at 67 days. Margins are 10 basis points higher than the nearest competitor, and 140 bps higher than the average used-car dealer.
In short, AutoNation is clearly the class of the auto retailing industry.
At June 30th, store count numbered 242, representing 319 franchises and 39 brands in 15 states. In September, AN will open Mercedes-Benz of Del Rey in Del Rey Beach, Florida. This add point brings the Mercedes dealership count to seven in Florida and 14 company-wide.
AutoNation is focused on profitability rather than market share. Market share will take care of itself as US auto makers shrink brands and dealerships in an effort to streamline operations. As AutoNation lessons it reliance on US brands, it’s market share will increase by default. Said Jackson, “we continue to divest underperforming stores to optimize our portfolio. The divestitures are primarily domestic franchise. However, we will retain our high-volume, core domestic franchises. We expect over time that these domestic franchises will constitute about 20% of our new vehicle revenue (29% currently).
Jackson was asked specifically about this on the call:
Rick Nelson – Stephens
“Are you seeing an acceleration in store closings among competitors?”
Mike Jackson
“Yes, on the domestic side, absolutely. And as I said earlier, we have a core group of domestic stores that are great locations with high throughput franchises that as painful as the current environment will be long-term, we will be served well by the shakeout that is going on now.”
This news piggybacks on a previous post regarding the potential gains for AutoNation from domestic automaker’s problems.
It seems that expectations for several holdings, Dow Chemical (DOW), Sherwin Williams (SHW), Citigroup (C) and now AutoNation (AN) were all far worse than reality. With the exception of Citigroup (the jury is still out) they all have top flight management who are deftly steering their respective businesses through unprecedented times. With depressed share prices, better than anticipated results, and visibility clearing, buy opportunities abound.
Disclosure (“none” means no position):Long AN, none
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