AutoNation Profit Falls; Industry Stabilizing

FORT LAUDERDALE, Fla. (TheStreet) -- In an auto environment already bedraggled by dealer consolidations and big bankruptcies, retailer AutoNation(AN) announced today that its new car sales fell, dragging down on profits during the second quarter.

The company reported that its sales fell to $2.61 billion from $3.67 billion in the year-earlier quarter, led largely by a 35% drop in new car sales.

AutoNation said earnings came to $36.7 million, or 21 cents a share, compared to $51.8 million, or 29 cents a share, in the year-earlier period.

The company noted in a press release that excluding certain items and discontinued operations would have brought net income to an adjusted 29 cents a share.

A group of analysts polled by Thomson Reuters had expected the car retailer to turn a 24 cent per share profit, coupled with $2.8 billion in revenue.

"The second quarter was a pivotal moment for the automotive industry," AutoNation CEO Mike Jackson said in a press release, citing the improvement in macroeconomic conditions, particularly consumer credit. "The industry is now positioned for a healthy rebound."

"The stabilization of the SAAR in the second quarter is the first step to a gradual recovery and marks the first time since the end of 2007 that we did not see a significant sequential decline in industry new vehicle sales," Jackson continued. "Going forward, we expect a gradual improvement of new-vehicle sales beginning in the second half of 2009 and intend to increase our inventory of vehicles in a disciplined manner to meet demand."

Jackson also noted that the much ballyhooed "cash-for-clunkers" program should stimulate new car sales as well. The federal program, which started last Friday, gives rebates to new car buyers willing to trade in gas guzzlers for more fuel efficient vehicles. Still, reports doubting the program's longevity are already swirling today. Many are worried that the $1 billion set aside for the program, which was meant to run through the fall, has already been spent in the first week. -- Reported by Sung Moss in New York.

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