AutoNation chief executive officer Mike Jackson recently joined other company executives to expound on the significance of reaching its fifth standalone used-car store and service center this year.

Along with discussing the March opening of the retailer's respective fourth and fifth AutoNation USA stores in Las Vegas and Katy, Texas, during the company's latest quarterly call, Jackson shared rewarding sales results from the four-month-old Phoenix store.

”The Phoenix store has ramped up relatively quickly. In April, its fourth month open, it has turned profitable and sold approximately 140 units,” he said. “We believe our brand and One Price strategy, single associate digital selling process and strong customer care capabilities will continue to position us for success at our AutoNation USA stores.”

One Price is a foundational attribute of AutoNation USA. The total five USA stores that AutoNation now has open represents a milestone, Jackson explained.

“We always said that once we had five up and running, we would have a pause period where we define the ramp to profitability to decide which additional stores to open when,” he said.

Currently, additional sites have been located, purchased and permitted. A decision on when to greenlight those stores won’t be made until later this year, according to Jackson.

He said, “We're certainly very pleased with Phoenix that we took all the lessons learned from the first stores that opened in Texas, although it was very disruptive with all the hurricanes to really come to conclusions, but they were all applied in Phoenix and did show a very quick ramp to profitability four months.

“But we have to see if that can also be done in the other stores, and ultimately, what happens with the Texas stores. So, I think it's later this year that we decide when and how many additional USA stores to build,” Jackson explained.

When it comes to the lessons about the used-car standalone business and how to improve upon past retail strategy, Jackson shared how attention to pace and profitably is crucial in order to avoid the problems AutoNation saw after previous iterations of standalone pre-owned stores and service centers.

“Back in 1997, 1998, 1999 when I arrived. Unfortunately, the scale … and pace of the rollout of the original AutoNation USA stores back in the day, if you will, was completely wrong and completely unmanageable and unsustainable,” Jackson said. “While there were many aspects that absolutely had customer appeal as far as running it profitably, as for how they did it, it was not — there was no path to profitability.”

This time around, Jackson explained how AutoNation has augmented its approach to change the size, the layout and even what's going to happen within its USA stores.

“My recollection is that business was never profitable with the way it was done … but a lot of the other reasons are still the same,” he said. “To round it off, it's pre-owned. At retail, it's a 40 million unit a year marketplace, if you have a brand and a better customer experience and a better offering, you can take significant share in the pre-owned market from what the competitive choices are out there.

“We are not repeating the mistake of 1998, 1999, where you have a great idea and a great concept. But you move so fast that you don't have time to adapt and make adjustments and changes to figure out how it's all going to financially work," he continued. 

He said because of lessons learned, the company is now moving in a more disciplined way in regards to growth.

“When we start moving faster, we will do it with a high degree of confidence. But for five stores now, that's the number we need to come to all our conclusions,” he explained. “We have indications that things that are very good. We have other stuff to work on, which we are. And when we get through all that, we'll give you an update and that we're moving to the next tranche of stores,” Jackson said.

Meanwhile, of the five running AutoNation USA stores, Jackson confirmed that only the Phoenix store is profitable so far.

He said, “The fact that we have one of the early stores already profitable means we've really done something very different than what happened back in 1997, 1998.”

During the Q&A portion of the call with analysts, when asked about the outlook for the other four stores to become profitable, Jackson said that it won’t be until “sometime in the fall; we'll have a better idea.”

When it comes to growing its USA store business, Jackson said, “I want to make sure before I build a lot of these, that I have it figured out and that we do it right … I want a more patient, disciplined approach. All the other brand extension is underway; it's paying off; it's going to be a benefit to this company. Before the year is over, it's going to be evident what it means to us in the years ahead.”

He went on to explain how important it is to focus on profitability before moving faster because of the capital involved in operating some facilities.

“On the USA stores where it's a lot of capital involved in some facilities, I really want to have it correct and know the sight line to profitability and whatever other issues are there before we move faster. So that's our approach. So, I think it's a good plan. I think it makes a lot of sense," he said. 

Additionally, when asked about how the company has seen service contract sales on the used side, AutoNation chief operating officer and executive vice president of sales Lance Iserman explained that penetration levels have matched or beat the company's traditional stores.

“We will see that transition into our service bays there, as well as our maintenance that we are doing on the vehicles, too,” added H. Scott Arnold, executive vice president of customer care and brand extensions.