(Reuters) - AutoNation Inc (AN.N), the largest U.S. auto retail chain, on Wednesday reported a 21.8-percent fall in quarterly profit, hurt by lower new vehicle sales, and the company’s shares fell 4.4 percent in early New York trading.
New car retail sales at the Fort Lauderdale, Florida-based company dropped 6.7 percent to 79,892 units, in the second quarter. Used-car sales rose 2.9 percent to 58,266 units.
“You have a chaotic situation” in the new vehicle market, AutoNation Chief Executive Mike Jackson told Reuters on Wednesday. Automakers have 4 million vehicles in inventory, and dealer profit margins on new vehicles are getting squeezed as manufacturers put pressure on dealers to clear the backlog.
AutoNation said second quarter results were hurt by weak sales in Florida and Texas, two of the company’s major markets. Problems managing the launch of a no-haggle, One Price sales system also undercut results, the company said.
Jackson said AutoNation will focus investment on efforts to expand used vehicle sales, collision repair, used car auctions and AutoNation-branded repair parts sales.
AutoNation has previously said it would invest $500 million through 2018 to expand its brand beyond new vehicle sales, funding the effort by selling underperforming new car dealerships. Jackson said the company has spent about $200 million on the brand extension effort, so far.
“I’ve got to grow my business and profits somewhere else,” beyond new vehicle sales, he said.
Key automakers have reported declining sales for the past few months, with July being the fifth straight month in which volumes fell as car companies cut back on sales to daily rental fleets.
AutoNation’s revenue per vehicle for new cars rose 2.3 percent to $36,686, and fell 2.1 percent to $19,413 for used vehicles.
The company’s net income from continuing operations fell to $87.7 million, or 86 cents per share, in the quarter, from $112.1 million, or $1.08 per share, a year earlier.
Revenue fell 3 percent to $5.28 billion. On a same-store basis, sales fell 2 percent.
Up to Tuesday’s close, shares fell about 14 percent this year.
Reporting by Rachit Vats in Bengaluru and Joseph White in Detroit.; Editing by Shounak Dasgupta and Nick Zieminski