(Reuters) - AutoNation Inc (AN.N) reported lower-than-expected revenue on Tuesday, as the largest U.S. auto retail chain sold fewer new vehicles, and the company said it plans to scale back investment and overhead costs in 2019.
The company’s shares fell 8 percent in early trading after it reported an 8.1 percent fall in new car retail sales volume for the third quarter.
The company plans to reduce investment following an “elevated period of brand extension investment” in higher-margin service and used car operations to offset the squeeze on profits from new vehicle sales, Chief Executive Officer Mike Jackson told Reuters.
The retailer will move toward “a more normalized” level of overhead costs, below the levels of the latest quarter, Jackson said.
The Fort Lauderdale, Florida-based company said selling, general and administrative costs were equivalent to 11.7 percent of revenue in the third quarter, up from 11.2 percent a year earlier.
Top automakers have reported declining sales over the last few months and U.S. new auto sales are expected to dip in the second half of 2018 as rising interest rates translate into higher monthly car payments and push more Americans toward buying used vehicles.[reut.rs/2AzABqz]
AutoNation’s used car sales volumes rose nearly 2 percent.
The company reported a 15 percent jump in quarterly profit that was in line with analyst estimates, but Buckingham Research analyst Glenn Chin said a lower-than-expected tax rate boosted EPS by about 6 cents.
AutoNation’s revenue from used vehicle sales rose 4.3 percent to $1.3 billion in the third quarter ended Sept. 30, while gross profit in the business increased 6.2 percent to $91 million.
Revenue from per used vehicle sold by AutoNation rose 3.3 percent to $20,044 and gross profit per vehicle was up 2.3 percent at $1,446.
The company, which also announced an investment of $50 million in online car retailer Vroom Inc, said revenue from new vehicle sales fell 5.6 percent to $2.93 billion in the quarter and gross profit was down 13.4 percent at $125.4 million.
AutoNation’s net income from continuing operations rose to $112.3 million, or $1.24 per share, from $97.6 million, or $1 per share, a year earlier.
Total revenue fell 1.5 percent to $5.35 billion.
Analysts on average had expected a profit of $1.24 per share and revenue of $5.56 billion, according to Refinitiv data.
Reporting by Rachit Vats in Bengaluru and Joseph White in Detroit; Editing by Maju Samuel