AutoNation increases net income 15%, invests in online retailer Vroom
AutoNation Inc.s third-quarter net income rose on gains in the companys parts and service, used-vehicle and finance and insurance businesses, despite a decline in new-vehicle gross profit. The dealership group also announced a $50 million strategic investment in online used-car retailer Vroom Inc.
Net income increased 15 percent to $112 million in the quarter, the company said Tuesday. Although that marks a significant boost from the year earlier, the comparison was helped by AutoNations 9.1 percent dip in net income during the third quarter of 2017. The prior-year drop came after 2017s Hurricane Irma slashed the retailers after-tax net income by $8 million.
Revenue in 2018s third quarter dipped 1.5 percent from the year earlier to $5.35 billion.
AutoNation invested $50 million in Vroom, which gives it an ownership stake of about 7 percent, the company said. The investment establishes a foundation for potential strategic partnership opportunities with experienced e-commerce executives, AutoNation said in a statement. Vroom has offices in New York City and Houston.
"We will continue to strategically invest in emerging digital technologies, internally and externally, as the mobility space is transforming," AutoNation CEO Mike Jackson said in a statement. "We are excited to invest in Vroom, a leader in the online car retail business."
In addition to the Vroom investment, AutoNation also operates its own online car-buying platform, AutoNation Express, which was launched in 2014. At the time, Jackson said customers would be able to finance and buy a vehicle online and sign paperwork electronically the next year, but the ability to complete a vehicle purchase online has taken longer.
In March, executives said AutoNation customers still couldnt complete a transaction online, but the company was testing remote signing for some paperwork. Consumers could reserve a vehicle through the website and calculate their monthly payments based on a credit score they entered. The information customers entered online automatically populates into stores dealership management systems.
Private-label credit card
AutoNation also announced that in the third quarter it rolled out a private-label credit card in partnership with Synchrony Financial. In this latest element of its brand-extension initiative, AutoNation customers can use the credit card to purchase AutoGear accessories, automotive maintenance and repair services and some F&I products.
Sales: New-vehicle retail sales fell 8.1 percent from a year ago, when there was a post-hurricane sales uptick in Texas and Florida, to 79,237, while used-vehicle sales rose 1.9 percent to 60,446.
Same-store sales: Same-store new-vehicle sales fell 6.3 percent to 78,275. That compares with a 2.5 percent dip in new-vehicle sales in the U.S. industrywide during the quarter. Same-store used-vehicle sales increased 2.8 percent to 58,666.
Profit lifts: Although same-store new-vehicle gross profit fell 13 percent, other business lines grew. Parts and service gross profit posted the most growth at 6.6 percent. Used-vehicle gross profit rose 5.9 percent, and F&I gross profit increased 3.6 percent.
AutoNation, of Fort Lauderdale, Fla., ranks No. 1 on Automotive News list of the top 150 dealership groups based in the U.S., with retail sales of 329,116 new vehicles in 2017.