Tech

AutoNation Sets For A $500 Million Expansion To Solve Net Income Drop

By Jiran , Oct 29, 2016 04:49 AM EDT

AutoNation just reported a 9 percent decline in net income in the third quarter of 2016. The largest automotive retailer in the US is now set to spend $500 million for an expansion over the next years. In the forefront of the said expansion is the launch of stand-alone used vehicle stores.

AutoNation's Net Income Drop

According to the Fortune, AutoNation revealed that their net income per share remained flat at $1.05. Apparently, this is below the forecasted $1.15 by the Thomson Reuters I/B/E/S. The company's board has already approved $250 million in common stock buybacks.

The cited cause of the drop AutoNation's net income is the recalls for this year. Automakers have recalled Takata airbag inflators. AutoNation mentioned that the profit has been down by $6 million. 14 percent of its used-vehicle inventory had not been sold.

According to 24/7 Wall St., the auto retailer's stock went down by nearly 5 percent on Friday morning. That amounts to $43.80 in a 52-week range of $40.45 to $65.51. Prior to AutoNation's announcement, the 12-month price target on the stock was $56.33.

AutoNation's Brand Expansion

According to the Automotive News, the AutoNation USA's used-vehicle stores will start to operate next spring. They plan on opening five stores in 2017. Apparently, the first one will be in Houston. The company's CEO Mike Jackson disclosed that 20 stores are already in development. That's only among the possible 100 stores that AutoNation can afford.

The Automotive News further reports that AutoNation will also offer a no-haggle pricing on all used vehicles. This will cover those being sold at AutoNation USA stores and the company's traditional 270 franchised dealerships.

The said dealership groups will add collision centers and renovate existing ones, launch a line of AutoNation-branded maintenance and repair parts, sell AutoNation-branded vehicle accessories at its dealerships and expand its auction business to five locations.

Jackson said that AutoNation is still committed to achieving and sustaining operational excellence. They aim to create an unmatched customer experience. AutoNation also promised to provide enhanced services.

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