© Stocksak. FILEPHOTO : FILEPHOTO – Vehicles for sale at AutoNation Toyota in Cerritos, California, December 9, 2015 are shown. REUTERS/Mario Anzuoni
By Joseph White
DETROIT (Stocksak), – Auto retailer AutoNation (NYSE) reported that its third quarter adjusted net income dropped by 7% mainly due to lower used vehicle profits. However, the company stated that it plans to repurchase up to $1 billion of shares in order reflect strong cash flow.
AutoNation reports that same-store vehicle gross profits decreased by nearly 22% in the third quarter compared to last year. However, profits from premium luxury vehicles increased by 14% while parts and service profits increased by 9.6% compared to a year earlier.
AutoNation reported net income at $6.31 per share and revenue at $6.39 billion, a decrease of 1% compared to a year ago. Analysts had predicted revenue of $6.63 Billion for the last quarter.
Stocksak heard that overall, the demand for new cars “still feels robust,” said Chief Executive Mike Manley. Although inventories of new vehicles have increased from earlier in this year, they are still very low compared with historical levels.
Manley said that AutoNation executives are reviewing used vehicle inventory weekly as prices fall. He said, “That can come back to bite you very quickly.”
AutoNation shares and other auto retail chains like CarMax Inc (NYSE:) have fallen as rising inflation and interest rates have pushed up borrowing prices and squeezed less wealthy consumers.
Manley stated that “there is no doubt asset prices are coming back down from their crazy values” within the auto retail sector. “This makes it more exciting for us to get back into the marketplace.” AutoNation will look for additional opportunities to purchase dealerships and buy back its shares.
AutoNation stated that it had agreed to purchase four dealerships with more than $320 million in annual revenue from Moreland Auto Group, Colorado.