Please ensure Javascript is enabled for purposes of website accessibility

Why AutoNation Stock Has Lost 23% So Far in 2020

By Demitri Kalogeropoulos – Jul 8, 2020 at 9:04AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The new-car industry took a big hit during the initial phases of the COVID-19 lockdown.

What happened

AutoNation (AN -0.03%) shareholders are trailing the market this year. Their stock dropped 23% compared to a 4% decline in the S&P 500 through the end of June, according to data provided by S&P Global Market Intelligence.

The new- and used-car retailer's stock had declined by nearly 60% at one point in the year, but its subsequent rally still left it well below peers like CarMax (KMX -0.35%), which rose slightly during the first half of 2020.

A couple shops for a new car.

Image source: Getty Images.

So what

Like CarMax, AutoNation saw slumping customer traffic during the COVID-19 pandemic store closures. The chain also struggled with major inventory challenges as automobile pricing dove in March and April. These issues contributed to an operating loss of $219 million in the first quarter compared to a $191 million gain a year ago. CarMax, in contrast, managed a slight net profit through the worst months of the pandemic to date.

Now what

AutoNation's next earnings report in late July will cover the selling months of April, May, and June, and so it will show the most direct impact of store closures, along with rebounding customer traffic trends. The big question going forward is how well the auto retailer managed its inventory levels. Inefficiencies there would show up in more writedown charges and a potentially lower gross profit margin at least through the end of 2020.

Demitrios Kalogeropoulos has no position in any of the stocks mentioned. The Motley Fool recommends CarMax. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

AutoNation, Inc. Stock Quote
AutoNation, Inc.
$106.96 (-0.03%) $0.03
CarMax Inc. Stock Quote
CarMax Inc.
$79.49 (-0.35%) $0.28

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/25/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.