AutoNation Continues Aggressive Approach to Streamline Business and Reduce Costs
Steve Kwak Named President of AutoNation USA with Expansion Plans
FORT LAUDERDALE, Fla., Aug. 19, 2020 /PRNewswire/ -- AutoNation, Inc. (NYSE: AN), America's largest and most recognized automotive retailer, today announced that the Company continues its aggressive approach to streamline its business. Over the last two years, AutoNation has implemented a restructuring plan that reduced costs annually and consolidated its region infrastructure from three to two regions. In 2020, further reductions to headcount, advertising, and discretionary spending were also made. AutoNation's adjusted SG&A as a percentage of gross profit, 68.2% in the second quarter of 2020, represented a 520 basis point improvement compared to the second quarter of 2018.
As part of the Company's continued efforts to reduce costs and increase efficiencies, AutoNation will close its aftermarket collision parts business, referred to as AutoNation Collision Parts (ACP) by the end of 2020. The ACP business represented less than 1% of AutoNation's Parts and Service gross profit for the six months ended June 30, 2020. The Company will continue its solidly profitable PrecisionParts business, which includes the sale of branded maintenance and repair parts. AutoNation expects that the SG&A savings related to the closing of the ACP business will be approximately 100 basis points as a percentage of gross profit, and now targets operating below 68% SG&A as a percentage of gross profit beginning with the third quarter of 2020. In connection with the closing, the Company currently estimates that it will incur charges in the second half of 2020 of approximately $52 million, of which approximately $12 million will be cash expenditures. The Company also expects additional cash expenditures following the closing of approximately $9 million related to existing contractual obligations.
AutoNation continues to prioritize its capital allocation towards opportunities that it believes will have the greatest return potential. The Company recently announced the major expansion and acceleration of AutoNation USA stand-alone used vehicles stores, which have been highly successful in 2020. AutoNation plans to build at least 20 additional stores over the next 3 years. Steve Kwak, AutoNation's Western Region President, will now also serve as President of AutoNation USA. Mr. Kwak has been responsible for the continued success of the current AutoNation USA stores for the last two years.
"We see an opportunity to take a larger share of the used vehicle market and benefit from the increased interest in vehicle ownership by our customers. AutoNation's strong brand, first-class digital capabilities, and One Price pricing strategy, combined with lower acquisition cost and stable used vehicle retail pricing make AutoNation USA stores an attractive opportunity," stated AutoNation's Chairman and Chief Executive Officer, Mike Jackson.
About AutoNation, Inc.
AutoNation, America's largest and most recognized automotive retailer, is transforming the automotive industry through its bold leadership, innovation, and comprehensive brand extensions. As of June 30, 2020, AutoNation owned and operated over 325 locations from coast to coast. AutoNation has sold over 12 million vehicles, the first automotive retailer to reach this milestone. AutoNation's success is driven by a commitment to delivering a peerless experience through customer-focused sales and service processes. Since 2013, AutoNation has raised nearly $25 million to drive out cancer, create awareness, and support critical research through its DRIVE PINK initiative, which was officially branded in 2015.
Please visit www.autonation.com, investors.autonation.com, www.twitter.com/CEOMikeJackson, and www.twitter.com/AutoNation, where AutoNation discloses additional information about the Company, its business, and its results of operations. Please also visit www.autonationdrive.com, AutoNation's automotive blog, for information regarding the AutoNation community, the automotive industry, and current automotive news and trends. Please refer to investors.autonation.com for reconciliations of previously disclosed non-GAAP financial measures used in this news release.
FORWARD-LOOKING STATEMENTS
This news release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements. Words such as "anticipates," "expects," "intends," "goals," "plans," "believes," "continues," "may," "will," "could," and variations of such words and similar expressions are intended to identify such forward-looking statements. Statements regarding estimated charges related to the closing of the ACP business and the planned expansion of our AutoNation USA stand-alone used vehicle stores, as well as statements regarding our expectations for the future performance of our business (including with respect to SG&A as a percentage of gross profit) and the automotive retail industry and other statements that describe our objectives, goals, or plans, are forward-looking statements. Our forward-looking statements reflect our current expectations concerning future results and events, and they involve known and unknown risks, uncertainties, and other factors that are difficult to predict and may cause our actual results, performance, or achievements to be materially different from any future results, performance, and achievements expressed or implied by these statements. These risks, uncertainties, and other factors include, among others: the ultimate net realizable value of the relevant inventories; the estimated fair values of certain other assets; actual fees paid in connection with certain contract terminations; the final closing costs associated with the closing of the ACP business; our ability to successfully implement and maintain expense controls; our ability to implement successfully our strategic initiatives, partnerships, and investments, including the planned expansion of our AutoNation USA stores, our investments in digital and online capabilities, and other brand extension strategies; our ability to identify, acquire, and build out suitable locations in a timely manner; our ability to maintain and enhance our retail brands and reputation and to attract consumers to our own digital channels; and other factors described in our news releases and filings made under the securities laws, including, among others, our Annual Reports on Form 10-K, our Quarterly Reports on Form 10-Q and our Current Reports on Form 8-K. Forward-looking statements contained in this news release speak only as of the date of this news release, and we undertake no obligation to update these forward-looking statements to reflect subsequent events or circumstances.
SOURCE AutoNation, Inc.
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