July 17--Fort Lauderdale-based AutoNation on Thursday reported yet another quarter with record results, as it sped up its $100 million investment in online programs to stay ahead of its rivals.
The country's largest dealership chain said second-quarter revenues hit $4.8 billion, up 8 percent, and net profit reached $100 million, up nearly 12 percent, compared to the same period a year ago.
That solid growth led to a new second-quarter record in earnings per share: 83 cents of net income from continuing operations. It was the 15th straight quarter of earnings per share up at least 10 percent.
Analysts had expected a bit stronger growth in earnings, based on AutoNation's recent history of outpacing gains in a U.S. auto market roaring back from a dive during recession.
But analysts underestimated how much the company is investing now on its digital programs, said Chief Executive Officer Mike Jackson. Its $100 million, two-year outlay includes more ads to lure customers to website branded as AutoNation coast-to-coast. And it upgrades those sites to allow such features as scheduling appointments for repairs and paying for that service online.
By 2016, AutoNation aims to offer an integrated system that will let customers go to the sites to see actual inventory, obtain pricing and make a deposit for the new or used vehicle online, Jackson said.
"The consumer wants one experience," said Jackson, explaining why AutoNation is pioneering the online systems. "They want to move seamlessly back and forth between the digital world and stores."
To be sure, AutoNation faced big challenges during the quarter, including servicing thousands of recalled cars, many that General Motors had developed under its old structure.
The company has increased hiring of technicians beyond the 400 it had forecast for this year, and it is extending hours at many stores to handle those repairs, said Chief Operating Officer Mike Maroone.
"The recall activity has put a strain on our service departments," Maroone said Thursday. "We need to add more technicians in every market and get customers in and out faster."
Jackson said it's become clear that "dealing with the old GM was like dealing with the three monkeys: See no reality, hear no reality, and speak no reality."
But he believes the new chief at the reorganized GM, Mary Barra, should remain at the helm.
"She has taken many courageous steps," including meeting with victims of accidents of flawed cars, conducting an aggressive investigation, hiring compensation expert Kenneth Feinberg and make dramatic changes on how GM functions, Jackson said.
Despite the recall problems, sales of new vehicles in the U.S. market remain on pace to top 16 million units this year, up from 15.6 million last year, Jackson predicted. He has correctly forecast sales for years -- while many rivals underestimated the recovery.
AutoNation has been boosting earnings per share in part by buying up more stock. In the second quarter, it re-purchased 1.1 million shares of common stock for roughly $64.1 million. As of July 16, it still had authorization for its board to buy back about $336 million more in stock.
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