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Tickers in this Article: AN, KMX, TM, GPI
AutoNation (NYSE:AN), the largest automotive retailer in the United States, continued to execute as well as could be expected in 2009. For the fourth quarter 2009, revenues were up 8%, along with a 7% increase in unit sales. Adjusted EPS in the fourth quarter was 29 cents compared to 13 cents in the 2008 fourth quarter. For the year, EPS was $1.15 against $1.01 per share in 2008.

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The Best of Both Worlds
Despite a U.S. industry new vehicle sales decline of approximately 22% in 2009, AutoNation managed to increase its full-year profits by 14% in 2009. This is because AutoNation and its major competitor CarMax (NYSE:KMX) are in the business of selling both new and used vehicles. Customers come to these mega auto retailers because they offer all the major brands and, in many cases, the most competitive prices. So instead of visiting several dealership to determine what brand to choose, customers at AutoNation and CarMax can view Hondas, Toyotas, Fords and a host of other automotive makes.

Used Has Rewards
A closer look inside AutoNation's numbers reveals the advantages of being a retailer of both new and used vehicles. While new vehicle sales usually represent over 50% of sales, used vehicle sales are much more profitable. AutoNation earns around $2,100 selling a $30,000 new car but earns $1,600 selling a $16,000 used car. Nevertheless, the company still makes a quality gross profit margin on new vehicle sales. So the key for AutoNation, or any retailer for that matter, is sales volume. While AutoNation was able to turn in a profit despite declining volumes, smaller competitor Group 1 Automotive (NYSE:GPI) could not.

Don't Forget Toyota
And like many businesses in 2009, AutoNation wasn't immune from a consumer pullback. The company sold 25% fewer new cars and 20% fewer used cars in 2009 versus 2008. And yes, Toyota's (NYSE:TM) recent problems have affected it sales beyond its dealerships. Despite solid sales numbers during the first 9 months of 2009, Toyota unit sales were down nearly 10% in the fourth quarter at AutoNation. On the quarterly conference call, executives said that the Toyota recall has affected more than 50% of its new and 25% of its used Toyota inventory.

Bottom Line
As the largest automotive retailer in the nation, AutoNation benefits from its size and its non-affiliation with any specific brand. Yet car sales, used or new, will remain restricted given the recent recalls and the high unemployment rate.

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