FORT LAUDERDALE, Fla. - AutoNation Inc., the nation's largest auto retailer, said Thursday its fourth-quarter earnings fell 31 percent, falling short of Wall Street expectations as drops in California and Florida vehicle sales persisted amid a slumping housing market.
AutoNation Chief Executive Mike Jackson said he expected U.S. new vehicle sales to decline to "mid-15 million" vehicles in 2008, compared with total industrywide sales of 16.1 million vehicles in 2007.
But recent interest rate cuts and a proposed economic stimulus package could begin helping the industry as early as late 2008, Jackson told The Associated Press in a telephone interview.
"The medicine to deal with these declines is just arriving now," Jackson said. "It can't take hold until later this year or early next year. Therefore, '08 will be the third year of decline."
In the fourth quarter of 2007, AutoNation earned $51.7 million, or 28 cents per share, compared with a year-ago profit of $75.2 million, or 36 cents per share. Revenue slipped 4 percent to $4.21 billion, from $4.39 billion in the prior-year period.
Analysts expected profit of 31 cents per share on revenue of $4.22 billion, according to a poll by Thomson Financial.
Shares of AutoNation fell 11 cents to $14.81 Thursday, after falling as low as $14.06 earlier in the session.
The slowdown of vehicle sales in California and Florida — which together account for half of the retailer's new vehicle sales — drove down earnings. The two states account for 20 percent of industrywide new vehicle sales.
Fort Lauderdale-based AutoNation said the sluggish housing market in Florida and California curbed consumers' ability to buy big-ticket items such as new vehicles. A construction slowdown has hurt light truck sales, and Chief Operating Officer Mike Maroone said AutoNation was managing softness in used vehicle demand by lowering prices.
In the past two years, U.S. auto retail sales have declined 12 percent, the company said. Jackson said economic downturns run in cycles of 30 to 40 months, and the market is currently 24 months into the downswing.
Same-store sales in the fourth quarter were down 4.5 percent compared to the same period in 2006.
"Considering the tough environment that we're in, I think we're managing through it as well as we can," Jackson said.
Jackson said the major Detroit automakers have acknowledged the tough economic times by "reducing production to avoid the situation where they had in '05, where they had to resort to extreme incentive programs."
Ford Motor Co., General Motors Corp. and Chrysler LLC accounted for 34.8 percent of new vehicle revenue in 2007 — down from 37.8 percent in 2006.
"It's relative reliance upon the sale of U.S. domestic brands ... also likely continued to be a drag on performance," analyst Mark Warnsman of Calyon Securities Inc. wrote in a report.
For all 2007, net income was $278.7 million, or $1.39 per share, compared to $316.9 million, or $1.38 per share, for all of 2006. Both years included items for discontinued operations.
The company's revenue for 2007 totaled $17.7 billion, down 5 percent compared to 18.6 billion in 2006.
AutoNation operates 322 franchises in 15 states.
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