FORT LAUDERDALE, Fla. — AutoNation executives reported the company’s sales and F&I performance from the first quarter of 2017 in a scheduled conference call with analysts and reporters. The nation’s largest auto retailer’s total revenue, gross profit and F&I production were flat from the year-ago period, but used-car sales increased by about 6%.

Chairman and CEO Mike Jackson predicted the pace would quicken in the second quarter, indicating progress in the first quarter may have been slowed as the company concluded the implementation of its “One Price” no-haggle sales model and cleared a glut of inventory held up by recalls.  

“During the first quarter, we saw increasing used-unit volumes as we focused on our One Price strategy, which is now fully rolled out at all AutoNation stores, and worked through the majority of the inventory that was previously on recall hold. We expect to see a sequential increase in the second quarter in both used-unit volumes and gross profit per vehicle retailed.”

At the close of the quarter, AutoNation operated 372 new-vehicle franchises and employed 26,000 associates nationwide. On a same-store basis, sales of new cars totaled 73,600 for the quarter, a year-over-year decrease of 3%. New-vehicle gross profit fell by $39 per unit to $1,886. Used-vehicle sales increased by 6% to 59,100 units, but used-vehicle gross profit averaged out to $1,243 per unit, a decrease of $389 per vehicle.

F&I profit per vehicle retail (PVR) was flat at $1,634 per copy. Total gross profit from AutoNation’s finance departments was also flat at $217 million.

Fixed-ops revenue and gross profit increased to $820 million (up 3%) and $361 million (up 5%), respectively. Those gains were led by warranty work, which delivered a 14% increase to finish the quarter at $78 million worth of gross profit.

Fresh off a first-quarter conference call with Lithia Motors Inc. in which executives from that group pledged to perpetuate an “aggressive cadence” of acquisitions, analysts asked Jackson whether AutoNation was looking for sellers. In response, he suggested that the cost to buy a dealership has yet to reflect recent moves made by manufacturers that he feels have relegated front-end gross to a “narrow corridor.”

“So I think it has to be factored into what the business is worth and what you pay in goodwill for the business. And from what we’ve seen thus far, sellers have not really come to terms with that,” Jackson said, making “brand extension” — in the form of the ongoing proliferation of AutoNation USA used-car stores — a more compelling strategy. “Now, if there’s an adjustment in pricing on acquisition, that’s another story. But so far, that hasn’t happened.”

Originally posted on F&I and Showroom

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Tariq Kamal

Tariq Kamal

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Tariq Kamal is the associate publisher of Bobit Business Media's Dealer Group.

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