U.S. auto dealer chain AutoNation Inc (AN.N) reported a nearly three-fold rise in quarterly profit on Thursday due to lower expenses and a one-time gain on its investment in online used-car retailer Vroom.
FILE PHOTO: Vehicles for sale are pictured on the lot at AutoNation Toyota dealership in Cerritos, California December 9, 2015. REUTERS/Mario AnzuoniChief Executive Mike Jackson told Reuters that retail demand for vehicles recovered throughout the quarter, and AutoNation operated “with 3,000 to 4,000 fewer employees than the same state of business would have required before” using online sales and other digital tools.
About 45% of AutoNation’s vehicle sales in the quarter were largely handled online, Jackson said.
Consumer demand for new and used vehicles was rebounding because of concerns about the safety of air travel and public transit, Jackson said, despite the uncertain overall economic outlook.
“Customers … want personal transportation,” he said. “They want personal space they can control. That has increased demand in preowned and new.”
Auto dealers have been hard hit by the novel coronavirus pandemic, with some states temporarily barring new vehicle sales. Their sales have plummeted due to stay-at-home orders aimed at curbing the spread of the virus, leaving them with no choice but to aggressively cut costs.
Following a sales slump in the last two weeks of March, AutoNation placed about 7,000 employees on unpaid leave, initiated temporary pay cuts for staff and curtailed advertising expenses.
That helped the company report a nearly 14% fall in expenses in the quarter and partially boost its net income from continuing operations, which rose to $279.9 million, or $3.18 per share, in the second quarter ended June 30, from $101 million, or $1.12 per share, a year earlier.
Excluding the $1.82 per share gain, it earned $1.41 per share.
Overall, revenue fell 15.2% to $4.5 billion as new vehicle sales were down 22.7% at 54,513 vehicles during the second quarter. Used vehicle volumes declined 5.5% to 58,920 units.
The Fort Lauderdale-based company’s gross profit per used vehicle jumped 23.7% to $1,796 during the quarter.
AutoNation has been investing in expanding its used-car business and branded car parts and services where margins are higher than new-car sales.
The company said Thursday it plans to build 20 new AutoNation USA used vehicle stores over the next three years.