AutoNation Inc., the country's biggest new-car dealership group, reported a 38 percent increase in first-quarter earnings per share Thursday - the company's strongest quarter ever. Now that AutoNation Inc. has closed most of its money-losing used-car megastores, analysts said, it is benefiting from a hot new-car market that continues at a record sales pace. The company has also been able to cut its administrative and dealership costs.
"It's a big turnaround for us," said Michael Maroone, chief operating officer of the Fort Lauderdale, Fla.-based company. "It's been a long three years, but the sun is finally shining. We just couldn't be happier."
AutoNation owns more than 400 new-car franchises nationwide, including 16 in Dallas-Fort Worth. Among its area dealerships are W.O. Bankston Lincoln Mercury, Bledsoe Dodge, Steakley Chevrolet and Payton-Wright Ford.
Michael J. Jackson, chief executive officer of AutoNation, described the first-quarter results as "significant progress" toward the company's goal of becoming the industry's low-cost new-car retailer.
The first quarter of 2000 was the company's first under Mr. Jackson and Mr. Maroone. Previously, AutoNation was run by its co-founders, H. Wayne Huizenga and Steve Berrard.
Since its inception in 1996, AutoNation's car and truck operations have struggled to show a profit. The company's used-car megastores, which cost as much as $20 million each and have huge overhead expenses, were largely to blame for its poor earnings in the past.
Late last year, after three years of losses at its megastores, AutoNation closed all, including three in the Dallas area, but a few. The company is also phasing out its rental car operations in a bid to become a "pure" new-car retailer, officials have said.
AutoNation said revenue this quarter from continuing operations rose from $4.56 billion in 1999 to $5.23 billion, a 15 percent increase. Earnings jumped from 13 cents per share, or $58.4 million, last year to 18 cents per share, or $64.7 million, this year.
Analysts said the results were particularly impressive given the flat used-car market nationally. Used cars generate more profit than new cars. And while new cars accounted for 61.5 percent of AutoNation's revenue this quarter - up from about 58 percent last year - the company's gross margins remained about 13 percent.
Meanwhile, net profit at many of the company's individual dealerships was up, with some stores reporting a 3 percent profit on sales, company officials said. That profit is about twice the national dealership average and reflects AutoNation's efforts to reduce its costs, company officials and analysts said.
Last year, the company says it cut $100 million from corporate administrative expenses and intends to slash a similar amount this year from dealership costs.
"I think it's the most important quarter the company has had because it's the first evidence we've had that Mike Jackson has the company's costs under control," said David Riedel, vice president of equity research at Salomon Smith Barney in New York. "If they continue to have this sort of revenue growth and cost reduction, they should have a very good 2000."
The company's stock closed Thursday at $8.63, up 25 cents. Its 52-week high is $18.38.