AutoNation(US:AN)2020-05-12 00:04Financial Data and Key Metrics Changes - Adjusted EPS from continuing operations was reported at $0.91, down 4% year-over-year despite significant headwinds from the coronavirus [7] - Same-store revenue for Q1 2020 was $4.7 billion, a decrease of 5% compared to the prior year [8] - Total store revenue decreased by $350 million or 6%, and gross profit decreased by $36 million or 4% [13] - SG&A as a percentage of gross profit increased to 73.9%, reflecting significant SG&A deleveraging in March [14] - Non-vehicle interest expense decreased to $24 million compared to $28 million in Q1 2019 [15] Business Line Data and Key Metrics Changes - Same-store variable gross profit was $423 million, a decrease of 5% [8] - Same-store customer care gross profit was $389 million, a decrease of 1% compared to the year-ago period [8] - Same-store new and used retail unit sales were down approximately 20% in the last 10 days of April, improving from a 50% decline in the first 10 days of the month [9] Market Data and Key Metrics Changes - Retail unit sales in Florida, Texas, and California improved by the end of April, with declines of approximately 25%, 5%, and 30% respectively [9] - Custom repair orders were down approximately 50% at the beginning of April, improving to down roughly 30% by the end of the month [10] Company Strategy and Development Direction - The company is focused on adapting to the automotive recovery and enhancing digital capabilities as a permanent change in consumer behavior [21][64] - AutoNation is positioned to meet customer transportation needs safely and responsibly during the recovery [17] - The company plans to remain disciplined over costs and capital as markets reopen and business recovers [16] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the unpredictability of 2020 but believes the automotive recovery is underway [17] - The company is confident that 2021 will be better than 2020, despite not providing specific numbers for the year [27] - Management noted that the automotive industry is currently in a recession, with employment levels lower than during the 2008-2009 recession [27] Other Important Information - The company has over $1.4 billion in liquidity, including over $750 million in cash [11] - Non-cash impairment charges of $315 million after-tax were recorded due to COVID-19 impacts [12] - The company suspended share repurchases before the end of Q1, having previously purchased $80 million worth of shares [15] Q&A Session Summary Question: What is happening in the used car market? - Management noted that retail pricing in the used vehicle market has been stable, with only a 1% to 2% movement [19] Question: How do you see consumer behavior changing post-COVID? - Management believes digital capabilities will be essential moving forward, with no difference in profitability between digital and traditional sales channels [21] Question: Do you see a meaningful reduction in stores in the independent used market? - Management indicated a trend towards companies with strong digital capabilities and a uniform experience, suggesting consolidation in the market [24] Question: How is the company navigating inventory levels? - Management expressed satisfaction with their inventory position and noted that they are prepared for the resumption of production [30] Question: What are the dynamics behind the decision to move away from PPP loans? - Management explained that the lack of a clear path to forgiveness for PPP loans led to the decision to return the funds and manage the business rationally [39] Question: What is the status of the partnership with Vroom? - Management expressed satisfaction with the investment in Vroom but did not indicate any significant strategic changes [47] Question: What are the monthly savings from cost-cutting measures? - Management indicated potential monthly savings exceeding $40 million from various cost-cutting actions [50] Question: What improvements are being seen in sales and services? - Management reported that sales are down approximately 20% in May, with customer care down in the high 20s [55]