AutoNation published its quarterly earnings report on April 20, shedding new light on the difficulties facing the dealership group as looks to stay ahead of the competition in a challenging post-pandemic economy.
The company’s first-quarter net profit fell 20% year-over-year, ending March at $288.7 million from last year’s $362.1 billion. Revenue also saw a decline, decreasing 5% from $6.8 billion to $6.4 billion. AutoNation’s new and used vehicle sales shrank 2.4% and 15% respectively, with a combined loss of 10%.
Given the unstable economic conditions seen over the course of last year, this performance is unfortunate but expected. In early 2022, new-vehicle profit margins were substantially inflated under tightened supply, leading to impressive first-quarter gains for many dealers, including AutoNation. Although inventory has since recovered, high prices and interest rates have bottlenecked the long-awaited release of pent-up demand outside of the premium and luxury segments. Many used-car dealers also saw a rapid decline in used car profits over the course of last year, as values plummeted in the wake of increased OEM production. The differences between the 2022 and 2023 car markets underscore the industry’s post-pandemic volatility.
That being said, AutoNation did make some improvements from the previous year. In its report, the dealer group noted its after-sales and used-vehicle gross profit had grown 11% and 13% year-over-year, breaking the company’s previous first-quarter records. However, the dealer group will still be looking for ways to change course in the coming quarters. Last year, Lithia Motors ended the company’s 25-year stint as America’s best-selling dealer, by selling 40,000 more vehicles. Although the organization is doubtlessly plotting a comeback, during AutoNation’s quarterly earnings call, Manley stated that “…a more cautionary approach than the past few years” was needed to accommodate the “…mixed economic signals in the market and within auto retail…”