As consumers were bombarded with these developments, confidence waned dramatically affecting store traffic and in turn AutoNation’s business.
In spite of this the company delivered a 3.2% operating margin as a percent of revenue excluding goodwill and franchise rights impairment charges.
In the quarter the import and premium luxury segments accounted for the vast majority of segment income at 81% of the income for the three segments. Combined the two represented 70% of the unit mix up from 65% in the quarter a year ago. While the domestic segment accounted for 30% of the new vehicle unit sales in the quarter, it disproportionately accounted for only 19% of the segment income and domestics contributed 54% of the segment income dollar decline.
According to CNW industry new vehicle unit volume was off 31%.
AutoNation compared favorably retailing 65,000 units, a decline of 24% in the quarter compared to the period a year ago. While AutoNation noted pressure across the board in all of its markets, it gained market share in the quarter.
Compared to the quarter a year ago, revenue per new vehicle retail of $30,000 was off $530 or 2% primarily driven by a decline in truck pricing that was highly incentivized in a shift in car/truck mix. Same-store gross profit per new vehicle retail of $1,975 was off $184 or 9% impacted by compressed truck margins which were pressured by the liquidation of low demand inventory.
AutoNation had margin compression in premium luxury.
In premium luxury AutoNation noted a continued trend toward entry-level or lower priced models. The premium luxury product cycle was a factor as well. Consumers will soon be seeing the new E-Class from Mercedes Benz, BMW’s new 7 Series, and the new RX350 from Lexus. These new models should help to improve volume and luxury gross margins.
At September 30 AutoNation had a 62-day supply of new vehicle inventory favorable to the industry at 72 days.
At 62 days the day supply increased 14 days compared to the quarter a year ago resulting from a slowing of sales in September. Since June 30 the company has managed inventory down by 6,600 units ahead of its target for the second half of the year. The company achieved this by adjusting its stocking levels and reallocating inventory among its stores to more accurately match consumer demand.
AutoNation retailed just over 45,000 used units in the quarter up 13% compared to a year ago.
Contributing factors to the decline were significantly fewer vehicle appraisals and trade-ins due to lower new unit volume and the conservative credit environment. Same-store revenue per used vehicle retail was down 7% as consumer demand for value or lower-priced vehicles continued to trend upward. Truck pricing remained under pressure but began showing signs of improvement as gas prices started to drop.
Gross profit per used vehicle retailed was down 8% or $136 with used cars and trucks having approximately the same margin and each accounting for about half of the margin decline.
In the quarter AutoNation moved 6,600 used vehicles from originating stores to more optimal locations with good success at retail.
AutoNation also grew its certified pre-owned business by 17% compared to the same period last year. It’s clear that customers recognize the tremendous value of certified pre-owned vehicles and manufacturers are generally supporting them with strong incentive programs.
The used day supply of 41 days at September 30 is two days lower than a year ago.
At $609 million same-store revenue for service and parts was off 5% with gross profit off 6% at $264 million.
In May AutoNation began to sell its Value Care Program, a prepaid maintenance program in the service drive. The program has been well received. In fact in the third quarter AutoNation sold just over 4,000 plans.
Finance and insurance same-store revenue declined 21% on lower volume.
Same-store F&I gross profit per vehicle retailed was $1,071 off $20 or 2% year-over-year. In this environment the company is focused on the performance of the third and fourth quartile stores, improving cash opportunities from contracts and transit, and maximizing the existing preferred lender relationships. In the quarter AutoNation added two new lenders, one national and one regional; and expanded the footprint of five existing lenders. Today AutoNation has 23 preferred lenders offering prime and subprime financing as well as leasing.
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