Will AutoNation, Inc. (AN) Still Come Out Smelling Like a Rose?

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When I was considering buying my F-150 pickup last year, the first place I headed was my local Ford Motor Company (NYSE:F) dealer. I could have gone to a few others around me, but the one I chose was closest, so I went there. And bought. It really didn’t matter to me what the place was called because I knew it as “the Ford dealership.” and for all I cared it could’ve been called “Bob’s Cars” or simply “Ford,” even.

National auto dealership AutoNation, Inc. (NYSE:AN) thinks differently. It believes having a unified corporate presence will be a defining characteristic in pushing sales at its network of dealers, so it’s dispensing with all the local dealership names and advertising itself based on the corporate brand. I think it’s a lot of work and effort (and a little money) for nothing.

AutoNation, Inc. (NYSE:AN)Such a deal!
AutoNation is the biggest U.S. chain of dealerships, with 210 new-vehicle franchises accounting for 180 stores, followed by Penske Automotive Group, Inc. (NYSE:PAG), with about 170 in the U.S. (It has another 173 located outside the States.)

Total revenue this quarter jumped 13% to $4.2 billion as new vehicle sales jumped 17% on a same-store basis. Profits surged 20% from the year-ago period, and it expects industry sales to continue marching higher until they hit 15.5 million cars, a 7% increase from 2012. Underscoring the good times in auto sales, Penske saw sales jump 17% on an 11.7% rise in comps.

New car sales data for January is due out today, and auto analysts are pretty much in agreement with the car dealer believing they’ll hit a seasonally adjusted run rate of 15.3 million cars. If correct, it would mark the best January sales month in five years. Ford is expected to post a better than 20% gain in sales, and General Motors Company (NYSE:GM) figures to be up 15%, but there are caution lights flashing.

Although January sales are strong — up 14.5% from last year — they’re down almost 23% from December. While that month’s sales may have been helped by folks buying cars to replace those lost to Hurricane Sandy, cars dealers still have to contend with elevated unemployment levels, falling consumer confidence, and an economy that experienced a contraction for the first time in three years in the fourth quarter. Those are some pretty big headwinds that may see auto sales play out differently as the year progresses.

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