(Reuters) - AutoNation Inc (AN.N) Chief Executive Mike Jackson said a recovery in consumer demand for cars and trucks has begun as states emerge from coronavirus quarantine orders, and shares of the No. 1 U.S. auto retailing chain rose after the company outperformed expectations for a tough first quarter.
“The automotive recovery at retail is under way,” Jackson said in an interview. Many customers say they are buying vehicles out of concerns for the safety of traveling by mass transit and planes, Jackson said.
“The next vacation, they’re driving,” he said.
AutoNation said it earned 91 cents per share on adjusted basis, before $3.49 a share non-cash impairment charge. Revenue fell 6% to $4.7 billion. Analysts on average had expected quarterly earnings of 66 cents per share on revenue $4.57 billion, according to IBES data from Refinitiv.
AutoNation shares rose 5.7% in early trading Monday.
Auto dealers were hit hard during the first quarter by the virus outbreak, with some states temporarily barring new vehicle sales. Sales have plummeted amid the lockdowns aimed at curbing the virus spread.
AutoNation said new vehicle sales were down 10.7% at 56,739 vehicles during the first quarter, while used vehicle volumes declined 8.2% to 56,149 units.
However, Jackson said business is recovering as more states have eased stay-at-home orders. As of May 8, states that accounted for 50% of AutoNation’s revenue remained under stay-at-home orders, down from 95% at the beginning of April. Same-store sales for new and used vehicles were down 20% during the last ten days of April, compared to a 50% drop during the first ten days of the month.
About 45% of AutoNation’s sales are now taking place online, Jackson said.
To weather the sales slump, AutoNation had put nearly 30% of its workforce, or 7,000 employees, on unpaid leave, including temporary pay cuts for staff, curtailed advertising expenses and postponed over $50 million of expenditures through the second quarter of 2020.
Jackson said the company has added back about 1,000 workers as business has recovered. But with more customers shopping online, it is not clear whether the company will ultimately replace all the jobs eliminated, he said.
“We’re going to take a close look, step by step, as to how we rebuild the business,” he said.
Reporting by Rachit Vats and Ankit Ajmera in Bengaluru; Editing by Shounak Dasgupta and Nick Zieminski