Automobile dealer AutoNation retreated from all-time highs despite beating wall street expectations. Let’s take a look at why. 🤔
First, the company reported adjusted earnings per share of $6.29 vs. the $5.91 consensus estimate. Revenues of $6.9 billion also topped the $6.8 billion anticipated.
Executives say new vehicle and after-sales revenue like repairs and maintenance services increased, helping offset a decrease in used vehicle sales. Demand for personal vehicle ownership remains strong, though customers are being more discerning given higher interest rates and selling prices. 👍
On the negative side, gross profit per vehicle fell 24.4% YoY. The company has had to offer discounts to spur demand and expected margins to continue moderating. Driving that forecast is the expectation that inventory levels will continue to rise, causing fewer vehicles to be sold at sticker prices and the company maintaining promotions to keep inflation-strapped consumers enticed. 🔻
Costs were also higher this quarter, with selling, general, and administration expenses at 63% of its second-quarter gross profits. That’s up from 61% in the first quarter and 55% a year earlier. Driving that increase was rising advertising spending and new investments in technology and other initiatives as the auto dealer works to expand its product and service offerings.
Overall, investors were not thrilled to see margins compress that much, and that management expects the decline to continue. $AN shares fell about 12% on the day, falling from all-time highs set earlier in the week. 📉
