AutoNation’s net income triples
Company nearly triples last year’s net income for same quarter
A shift to online shopping during the COVID-19 pandemic, a sharp reduction in its labor force and a boost in the stock price of online vehicle marketplace Vroom helped AutoNation nearly triple its net income in the second quarter of 2020, according to financial results released Thursday.
The Fort Lauderdale-based company, which operates more than 325 dealerships across the United States, reported a net income of $279.9 million for the quarter, compared with $101.0 million during the same period in 2019.
Earnings per share from continuing operations was $3.18 compared with $1.12 the previous year. Adjusted earnings per share from continuing operations was a record $1.41, an 18% increase compared to last year’s $1.20, the company reported.
“It was a remarkable quarter that we and our associates were able to deliver,” CEO and Chairman Mike Jackson said in an interview Thursday morning.
It didn’t start out that way. In early April, as most economic activity shut down in the United States during the first weeks of the COVID-19 quarantine, same-store unit sales dropped 50% compared to the previous year. By June, same-store sales were down just 13%.
The company had slashed its labor force early in the pandemic by furloughing 7,000 of its 24,000 workers. The cuts reduced operating costs just as a greater share of customers chose to stay at home and complete most of their vehicle purchases online.
Investors on the New York Stock Exchange reacted positively to AutoNation’s latest financial report, boosting its share price 6.5% to $52.03 Thursday morning.
The percentage of sales that took place primarily online increased from the low 30% range last year to the low 40% range this year. Jackson said he expects that increase to be sustained and about 3,000 layoffs will be permanent. About 3,500 employees have returned to work and the company expects to bring back another 1,000 as the year continues, the
company month.
“The COVID-19 pandemic has accelerated a shift in consumer behavior towards digital engagement,” Jackson said in a prepared statement.
“Our AutoNation Express online selling tools enable customers to buy and sell vehicles online, and our store-to-door delivery option allows customers to completely avoid visiting a showroom if they choose.”
The tool also keeps track of the value and maintenance history of customers’ existing vehicles, expediting the service and trade-in process and helping said earlier this to identify replacement vehicles available for a similar or lower payment.
A shortage of new vehicles stemming from manufacturing shutdowns combined with lower inventories of used vehicles boosted average revenue and gross profit of vehicles sold by the company. The share of used vehicles sold by the company increased from 25.8% during the second quarter of 2019 to 29.2% this year, while the share of new vehicles dropped below 50% — from 51.8% to 49.9%.
Demand remained high as consumers opted for the relative safety of their own vehicle compared to shared transit, Jackson said.
Still, new sales were vehicle unit down from 70,516 in the second quarter of 2019 to 54,513 this year, while used vehicle sales declined from 62,339 to 58,920. As a result, revenue fell 15%, from $5.34 billion to $4.53 billion. Expenses, meanwhile, declined 14%, from $637 million to $547.9 million.
Of the $279.9 million net income reported for the quarter, $161 million, or $1.82 per share, was attributed to last month’s initial public offering of stock in Vroom, an online used vehicle marketplace.
AutoNation invested $50 million in the company in October 2018, then led a $146 million funding round two months later.
After the company went public last month, its stock price quickly doubled.