(Adds CEO comments on U.S. auto market outlook, capital spending.)
Feb 11 (Reuters) - AutoNation Inc on Tuesday reported a 70% rise in quarterly profit, as higher demand for used vehicles helped the largest U.S. auto dealership chain offset a decline in new-vehicle sales.
The quarter also included a gain of 43 cents per share related to property divestitures and a non-cash benefit related to an investment.
The company’s profits have been hurt as new-vehicle sales weakened after a long bull run since the end of the 2007 to 2009 economic crisis.
Chief Executive Cheryl Miller told Reuters low interest rates and a strong job market should sustain combined new and used vehicle sales at about 57 million vehicles in 2020, flat with last year.
AutoNation cut its inventories by 11,000 vehicles from a year ago, and expects to hold capital spending for 2020 to a similar level as the $257 million spent in 2019, Miller said. AutoNation invested $393 million in capital spending in 2018.
“We are being extremely disciplined” about capital expenditures, she said.
AutoNation has been investing in expanding its used-car business and branded car parts and services, such as collision repair centers, to boost future profitability.
AutoNation’s used-car and parts and services businesses, which carry higher margins than new-car sales, could help the company lessen its dependence on automakers that dictate strict terms to retailers.
New-vehicle sales were down 5.1% at 74,383 units during the fourth quarter ended Dec. 31, while used-vehicle volumes grew 7.3% to 59,022 units.
Miller said rising prices for new vehicles will push more customers toward “nearly new” models returned from leases. AutoNation said new vehicle transaction prices have risen 15% in the past five years to $39,500.
The company said its net income from continuing operations rose to $157.7 million, or $1.74 per share, in the quarter, from $92.9 million, or $1.02 per share, a year earlier.
Revenue rose 2.5% to $5.55 billion.
Analysts on average had expected earnings of $1.14 per share on revenue of $5.53 billion, according to IBES data from Refinitiv. (Reporting by Ankit Ajmera in Bengaluru and Joe White in Detroit; Editing by Maju Samuel and Chizu Nomiyama)
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