AutoNation Expects Strong Demand Into 2022

When AutoNation Inc. announced robust sales of new and used vehicles for the second quarter, the firm also shared a rosy sales picture for the months to come. 

The company reported they expect strong demand for new vehicles to continue into next year, as low-interest rates and robust demand aided the top U.S. retailer in besting its quarterly earnings estimates.

AutoNation reported sales of new and used vehicles surged 42% and 37%, respectively, in the second quarter.

“Consumers are buying vehicles before they even arrive at our stores. We expect the current environment of demand exceeding supply to continue into 2022," said CEO Mike Jackson in a statement.

Jackson added that “everyone is comparing (current prices) against the collapse of last year.” But, he said, a year ago, used vehicle prices were depressed as rental fleets rushed to unload vehicles stranded by decreases in travel.

To meet unprecedented demand, the automotive retailer has stepped up efforts to acquire used vehicles directly from consumers. The plan appears to be working as AutoNation’s gross profit per new vehicle jumped 89% to $4,157 in the quarter ended June 30, while the gross profit per used vehicle rose 24% to $2,240.

The company reported 14 days of supply for new vehicles in the quarter, compared with 49-day supply a year earlier.

Adjusted net income from continuing operations beat records at $4.83 per share. Record revenue, at $6.98 billion, also exceeded expectations.

The company reported overhead costs fell in the second quarter. Overhead costs were 56.5% of revenue, down from 68.9% in 2020. Jackson predicted overhead expenses will be at 60% of revenue for all of 2021, compared to over 70% before the pandemic, as over half of customers use AutoNation’s shop and complete purchases online.

“We are at a good cost place, and digital capability enabled that,” Jackson said.

AutoNation had $1.6 billion of liquidity as of June 30 and reported its board had authorized a share buyback worth $1 billion.

The company reported it is on track to open four new stores in the United States in the second half of 2021, and 12 new stores in 2022.

Originally posted on Auto Dealer Today