April 25, 2017 / 12:11 PM / 4 months ago

UPDATE 2-AutoNation profit rises, sees increase ahead

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DETROIT, April 25 (Reuters) - AutoNation Inc, the largest U.S. auto retail chain, on Tuesday reported a higher quarterly net profit that beat expectations and said it expects sales and gross profit from used vehicle operations to rise in the second quarter.

New-car sales during the first quarter at the Fort Lauderdale, Florida-based company dropped more than 4 percent to 75,798 vehicles, while used-car sales rose more than 4 percent to 60,608 vehicles.

Revenue per vehicle for new cars rose 4 percent to $36,890, but slid 1 percent to $19,075 for used vehicles.

AutoNation Chief Executive Officer Mike Jackson told Reuters on Tuesday that the prices the company pays for used cars are falling as supplies of used cars rise and automakers offer deeper discounts on new vehicles.

"The manufacturers have made the decision to push for volume," Jackson said. The decline in used vehicle prices offers an opportunity for AutoNation to increase the profitability of its used vehicle sales in the second quarter, Jackson said. The company during the first quarter cleared out stocks of vehicles that had been held back because of unrepaired recalls.

The new and used vehicle markets combined should total more than 55 million vehicles this year, Jackson said, calling that a healthy overall level for AutoNation even if new vehicle sales stay flat.

AutoNation reported a first-quarter net profit of $98.1 million, or 97 cents per share, up 2.3 percent from $95.9 million, or 89 cents, a year earlier. Analysts, on average, expected EPS of 91 cents.

Revenue totaled $5.14 billion, up from $5.12 billion. Analysts expected $5.32 billion.

AutoNation reported a lower gross profit for vehicle sales in the quarter, but an increase for its parts and service operations. (Reporting by Nick Carey; Editing by Jeffrey Benkoe and Meredith Mazzilli)

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