AutoNation and other traditional devices car dealership in the United States turned a shortage of new and used cars to a profitable advantage in the first quarter, but didn’t. first Shares of the US auto retailer were volatile on Thursday as analysts questioned the outlook for consumer demand.
During Thursday’s conference call, analysts highlighted AutoNation CEO Mike Manley on whether consumer demand for new car is slowing down and why is AutoNation old car Profit margins fell in the first quarter.
AutoNation stock was flat in early trading, after initially rising 4.6% to $110.70 in pre-market trading, then falling nearly 5%.
Interest rates rise, high gas price and broader inflation in the US economy is putting pressure on consumers. Manley told Reuters that demand for used and new cars remains strong.
“We haven’t seen any drop in our claim levels yet,” Manley said. “They increase year by year. The industry is at a level where there is more demand than supply.”
Manley told analysts that while the US annual rate car sales has been operating at a recessionary rate, which is a reflection of the effects on manufacturing from supply chain difficulties.
“We have customers for everything coming,” says Manley.
AutoNation reported adjusted diluted earnings per share of $5.78, beating estimates of $5.25 per share, according to Refinitiv IBES data. Strong demand for used cars and strong margins from new car sales boosted profits.
AutoNation and Lithia Motors, two of the largest US auto dealership chains with hundreds of stores, both outperformed investors’ expectations for the January-March period. However, online used-car retailer Carvana on Wednesday reported a wider loss than analysts had forecast, and its shares fell before the market opened.
Lithia’s chief financial officer, Tina Miller, also told Reuters that “demand continues to outpace supply” even as car prices rise, pushing average monthly payments to around $450 from around $300. before the pandemic.
Lithia on Wednesday reported that it doubled its net income in its first quarter from a year earlier as revenue grew 54%.
AutoNation said its average gross profit on new vehicles it sold in the first quarter more than doubled from a year earlier, rising to $6,112.
AutoNation’s used car sales grew 47%, but average gross profit from used car sales fell 10%.
Manley said the company became concerned about prices and sales trends for certain used vehicles during the quarter, and moved to clear inventory. “We started using the data that we had available. We corrected very aggressively during the quarter,” Manley said.
AutoNation, Lithia and other US auto dealers built on brick-and-mortar showrooms are rapidly building their ability to sell and finance vehicles online, while expanding their profitability fix online activity authorized dealer such as Carvana no. AutoNation reported a 45.9% gross margin across parts and services for the first quarter. Services revenue grew $1 billion, up 18% year over year.
AutoNation’s net income was $362.1 million, or $5.78 per share, for the quarter ended March 31, compared with $239.4 million, or $2.85 per share, a year earlier.
Revenue rose 14.4% to $6.75 billion, above estimates of $6.48 billion.
