AutoNation Inc., the nation’s largest auto retailer, said Thursday its fourth-quarter earnings fell 31 percent, falling short of Wall Street expectations as the decline of vehicle sales in California and Florida continued due to a slumping housing market. Its shares fell almost 5 percent.
AutoNation Chief Executive Mike Jackson said he expected U.S. new vehicle sales to decline to “mid-15 million” vehicles in 2008, compared with total industrywide sales of 16.1 million vehicles in 2007.
But recent interest rate cuts and a proposed economic stimulus package could begin helping the industry as early as late 2008, Jackson told The Associated Press in a telephone interview.
“The medicine to deal with these declines is just arriving now,” Jackson said. “It can’t take hold until later this year or early next year. Therefore, ’08 will be the third year of decline.”
In the fourth quarter of 2007, the company earned $51.7 million, or 28 cents per share, compared with a year-ago profit of $75.2 million, or 36 cents per share. Revenue slipped 4 percent to $4.21 billion, from $4.39 billion in the prior-year period.
Analysts expected a profit of 31 cents per share on revenue of $4.22 billion, according to a poll by Thomson Financial.
The company said it continued to be hurt by the slowdown of vehicle sales in California and Florida — which together account for half of the retailer’s new vehicle sales. The two states account for 20 percent of industrywide new vehicle sales.
Fort Lauderdale-based AutoNation said the slumping housing market in those two key states has left consumers with less to spend on big-ticket items such as new vehicles. A slowdown in construction has hurt light truck sales.
In the past two years, U.S. auto retail sales have declined 12 percent, the company said. Jackson said economic downturns run in cycles of 30 to 40 months, and the market is currently 24 months into the downswing.
Same-store sales in the fourth quarter were down 4.5 percent compared to the same period in 2006.
“Considering the tough environment that we’re in, I think we’re managing through it as well as we can,” Jackson said. “We certainly welcome the significant rate cuts from the Federal Reserve — they’re absolutely necessary. The rate cut should help the environment later this year or early next year.”
Jackson said the Detroit automakers have “their best product lineup ever. However the economic situation is going to trump product.”
“What is very different than what we’ve seen in the past is they’ve acknowledged the tough economic environment and forward-looking are proactively reducing production to avoid the situation where they had in ’05, where they had to resort to extreme incentive programs,” Jackson said.
For all 2007, the company reported net income of $278.7 million, or $1.39 per share. That’s compared to $316.9 million, or $1.38 per share, for all of 2006. Both years included items for discontinued operations.
The company’s revenue for 2007 totaled $17.7 billion, a decrease of 5 percent compared to 18.6 billion in 2006.
AutoNation operates 322 new vehicle franchises in 15 states.