By Joseph White
DETROIT (Reuters) – Automotive retailer AutoNation, Inc reported third quarter adjusted net income fell by 7%, largely because of lower used vehicle profits, but the company said it plans up to $1 billion in new share repurchases reflecting strong cash flow.
AutoNation said third quarter, same-store used vehicle gross profits fell by nearly 22% in the quarter from a year ago. But profits from premium luxury vehicles grew by 14% and parts and service profits grew by 9.6% from a year ago.
AutoNation reported net income of $6.31 a share and revenue of $6.39 billion, up less than 1% from a year ago. Analysts had forecast revenue of $6.63 billion for the latest quarter.
Overall, demand for new vehicles “still feels robust,” Chief Executive Mike Manley told Reuters. New vehicle inventories are still lean compared to historical levels, though they have increased from earlier in the year, he said.
However, Manley said AutoNation executives are conducting weekly reviews of used vehicle inventory as prices depreciate. “That can bite you very quickly,” he said.
Shares in AutoNation and competing auto retail chains such as CarMax Inc have traded down as inflation and rising interest rates have pushed up borrowing costs and squeezed less affluent consumers.
“There is no doubt asset values are coming back down off their crazy values” in the auto retail sector, Manley said. “That makes it much more interesting for us to get back in the marketplace.” AutoNation will buy back its own shares, and look for more opportunities to acquire dealerships.
AutoNation said it has agreed to buy four dealerships with about $320 million in annual revenue from Moreland Auto Group of Colorado.
(Reporting By Joe White; Editing by Josie Kao)
