AutoNation, Inc., America’s largest and most recognized automotive retailer, announced that it 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.
The closure of the ACP business is part of AutoNation’s continued 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.
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.