AutoNation Revenue Up Its Profit

AutoNation Inc. said second-quarter profit surged, as the nation's largest dealership chain rode a car-sales boom expected to reach the highest levels in more than a decade.

The Ft. Lauderdale, Fla.-based company reported a second-quarter profit of $115.1 million, or $1 per share, up more than 14% from $100.4 million during the same timeframe a year earlier.

AutoNation's revenue rose more than 9% to $5.2 billion amid rising new-vehicle sales and strong results across other business segments, including used-vehicle sales, parts and service and finance and insurance. The company said net income from continuing operations hit a record.

Still, AutoNation's results missed Wall Street expectations. Analysts polled by Thomson Reuters expected AutoNation to earn $1.02 per share.

AutoNation's rising profits reflect low interest rates and gas prices that are spurring a torrid pace for auto sales. AutoNation Chief Executive Mike Jackson said the company expects new-vehicle sales to surpass 17 million for the full year, a level not seen since 2001. The dealership chain's new-vehicle sales rose 6% during the second quarter, bringing in nearly $3 billion in revenue.

With interest rates low, dealerships are able to offer longer-term financing, broadening the range of buyers who can afford a new car. Lower gas prices, meanwhile, are padding consumers' pockets.

Lower fuel prices are also spurring consumers to buy larger, less-efficient pickup trucks and sport-utility vehicles that typically deliver higher margins for auto retailers than passenger cars. Light-truck sales were up 9% during the second quarter, according to Wells Fargo & Co.

AutoNation also cited broader pent-up demand for new cars, with the average vehicle on U.S. roads more than 11 years old.

Mr. Jackson said AutoNation completed six months ahead of schedule the first phase of an online program called AutoNation Express that allows customers to reserve and put deposits down on vehicles. More than 20% of the dealership chain's sales were generated from websites during the first half of 2015, he said.

Mr. Jackson made waves earlier this month when he cut ties with TrueCar Inc., an online car-buying site. Mr. Jackson hopes to bolster AutoNation's online shopping capabilities to reduce reliance on third parties on sales and cut down on time spent in the dealership.

AutoNation is also on the front lines of widespread safety problems affecting the U.S. auto industry, especially with vehicles featuring rupture-prone air bags manufactured by Takata Corp. of Japan. The dealership chain completed more than 20,000 Takata-related recalls in the second quarter. The company expects over the next several years to replace an additional 400,000 air bags at AutoNation dealerships.

Mr. Jackson reiterated his support for the terms of a settlement between American Honda Finance Corp. and the Consumer Financial Protection Bureau and U.S. Justice Department on allegations of discriminatory lending practices. He has called the terms, which involve capping dealers' markup of interest rates, a "workable template" that other car retailers should follow.

Write to Mike Spector at [e-mail]

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