Auto Dealers: Weather Affected Financial Results

DETROIT, Oct 28, 2004; Michael Ellis writing for Reuters reported that three large car dealership companies posted weaker quarterly earnings, blaming the hurricanes that hit the U.S. Southeast this summer or costly incentives used to boost sales.

A fourth car dealer, UnitedAuto Group Inc. reported a 28 percent rise in net earnings, due to one-time gains from tax benefits and the sale of an investment, as well as higher margins on sales of new cars and trucks.

Bloomfield Hills, Michigan-based UnitedAuto earned $32.4 million, or 70 cents per share in the third quarter, vs. $25.3 million, or 61 cents per share, in the year-earlier quarter.

AutoNation, hit by the hurricanes in its home market of Florida, said third-quarter net earnings fell 15 percent to $92.4 million, or 34 cents per share, vs. $108.8 million, or 38 cents per share, in the year-earlier quarter.

Earnings from continuing operations fell to $95.0 million, or 35 cents per share, from $109.5 million, or 38 cents per share. Last month, AutoNation cut its forecast for earnings from continuing operations for the third quarter to a range of 33 to 35 cents per share, due to the hurricanes in Florida, where it derives about 30 percent of its operating profits.

AutoNation's results enable the company to continue to buy back its own stock, which will help the stock price, analyst John Casesa of Merrill Lynch said in a research report.

HURRICANE HURT

The hurricanes hit AutoNation earnings by 2 cents per share, but another factor was high sales incentives needed to clear inventories of unsold vehicles, AutoNation Chairman and Chief Executive Officer Mike Jackson said.

"Inventories have been high relative to demand, and that makes it intensely competitive and compresses front-end gross profit and increases your carrying costs," Jackson told Reuters in an interview.

Other car dealership companies also mentioned incentives as a negative factor during the quarter. Group 1 Automotive Inc. reported a loss of $9.6 million, or 42 cents per share, due to an after-tax charge of $29.4 million, or $1.26 per share, stemming from the writedown of goodwill and other assets linked to its operations in Atlanta.

Group 1 cut its profit estimate for the full year just last week, citing harsh market conditions and weather-related losses.

Asbury Automotive Group Inc. posted a 25 percent drop in net earnings, due to the hurricanes in Florida, where it derives 43 percent of its operating profits.

Asbury said net earnings fell to $12.1 million, or 37 cents per share, from $16.2 million, or 50 cents per share, a year earlier.