By Joseph White and Kannaki Deka
(Reuters) -AutoNation Inc on Thursday reported a better-than-expected quarterly profit and unveiled an additional $1-billion share buyback program, as the largest U.S. auto retailer benefited from surging car prices on tight inventories.
Consumer preference for personal transportation since the pandemic outbreak and a global chip shortage that has led to auto production cuts across the globe have been driving car prices higher.
AutoNation (NYSE:AN), which reported another quarter of record income, said new vehicle inventory remained at historically low levels leading to a marginal rise in new vehicle revenue in the third quarter ended Sept. 30.
Used vehicle revenue, on the other hand, jumped 53% to $2.32 billion compared to $1.51 billion a year earlier.
AutoNation Chief Executive Mike Jackson told Reuters that tight inventories and high prices are leading some customers to defer buying a new vehicle. However, Jackson said more customers are using AutoNation's websites to track vehicles the company's stores have coming to them in the next 30 to 60 days, and reserving a car or truck before it arrives.
"We're now at the limit of where can take inventories down to," Jackson said. "This could be the trough on the disruption, and early next year shipments could improve."
Consumer demand for vehicles is still strong, Jackson said, and shoppers who decide to defer a purchase are likely to come back when inventories improve.
"Pent-up demand is building," Jackson said.
Jackson will retire as AutoNation's CEO on Nov. 1 after 22 years leading the U.S. auto retail chain. He will be succeeded by former Fiat Chrysler Automobiles CEO Mike Manley.
Net income from continuing operations was $361.7 million, or $5.12 per share, for the quarter, compared with $182.6 million, or $2.05 per share, a year earlier. Adjusted net income per share was $5.12.
Revenue rose 18% to $6.4 billion.
Analysts on average had expected the company to report a profit of $4.2 per share, on revenue of $6.3 billion, according to Refinitiv IBES data.
New vehicle gross profit per vehicle retailed jumped 116% to $5,484, while used vehicle gross profit per vehicle retailed was up 5% at $2,104.
Shares of the company were up 1.7% at $117.9 in premarket trading.