AutoNation Inc. reported Thursday that weak vehicle sales in California, Florida and other key states beset by deteriorating home prices dragged its first-quarter earnings down 37 percent.The nation's largest auto retailer said it earned $50.7 million, or 28 cents per share, compared with $77.6 million, or 37 cents per share, in the year-ago quarter. Revenue fell 7 percent to $4 billion, compared to $4.3 billion in the year-ago period. Analysts polled by Thomson Financial expected a profit of 34 cents per share on revenue of $4.13 billion.

The Fort Lauderdale-based company said retail vehicle sales fell, especially in California, Florida, Nevada and Arizona "where the housing crisis has significantly impacted the automotive retail business."



Consumers have been less willing to buy big-ticket since falling home prices have cut into their equity and lenders have cut access to credit.

AutoNation saw more meager profits from the vehicles it did sell as buyers look for smaller, more efficient cars. Retail profits per new vehicle sold fell 10 percent, while profits per used vehicle sold fell 12 percent, the company reported.

"The most difficult period we feel was going to be the first two quarters of '08, and certainly the numbers confirm that," Chief Executive Mike Jackson told The Associated Press.

In March, billionaire investor and Sears Holdings Corp. Chairman Edward Lampert raised his stake in AutoNation to 37.2 percent. Lampert has accumulated AutoNation shares as the company's stock has plunged on slow sales and economic concerns.

Despite lower sales, AutoNation said it fared better than its peers.

Industry new vehicle sales fell about 11 percent nationally and 15 percent in the California, Florida, Nevada and Arizona markets, based on data compiled by CNW Research that was cited by AutoNation.

AutoNation's new vehicle sales fell 8 percent nationally and fell 11 percent in California, Florida, Nevada and Arizona — states which represent about 60 percent of the company's new vehicle business and about 25 percent of U.S. new vehicle sales.

Some areas, including Texas, Chicago, and Knoxville and Memphis in Tennessee, have been steady compared with the rest of the country.

Looking forward, the company said interest rate cuts could improve results in the second half of 2008, with possible market stabilization coming late this year and recovery in 2009.

"Those rate cuts take time to work their way through, but it's powerful medicine that will prove to be effective," Jackson said. "These downward cycles usually last 30 to 40 months, so we're deep into it."

Shares rose 10 cents to $15.21 in midday trading.

AutoNation owns and operates 321 new vehicle franchises in 15 states.

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AP Business Writer Samantha Bomkamp in New York contributed to this report.

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