Auto retail giant AutoNation Inc. said it will buy Priority 1 Automotive Group, as it announced record third-quarter results that saw net income nearly double, bolstered by higher used-vehicle sales and revenue and record new-vehicle gross profit per unit.
The nation's largest new-vehicle retailer said Thursday it posted third-quarter net income of $361.7 million, up 98 percent from the $182.6 million earned a year earlier. Revenue jumped 18 percent to $6.38 billion even as new-vehicle sales fell 12 percent.
"Demand continues to outpace supply for new vehicles," outgoing AutoNation CEO Mike Jackson said in a statement. Former Fiat Chrysler Automobiles CEO Mike Manley is set to take over as AutoNation's chief executive Nov. 1.
AutoNation said new-vehicle days supply was just 10 days at the end of September. A year earlier, it was 43.
"New-vehicle sales are constrained by reduced production volume with low inventory levels," Jackson said. "We expect this pent up demand to support sales for the foreseeable future."
AutoNation said it has signed an agreement and hopes to close on the Priority 1 deal by the end of the fourth quarter, pending manufacturer and other approvals. The acquisition is expected to generate about $420 million in annual revenue.
In late September, AutoNation purchased 11 dealerships and a collision center from Peacock Automotive Group in a deal originally announced in April. Those stores are expected to generate $380 million in annual revenue.
The retailer opened a used vehicle-only AutoNation USA store in Northglenn, Colo., also in September, and this week opened one in Littleton, Colo., the third of five AutoNation USA outlets it plans to open this year. Other locations are planned for Phoenix and Charlotte, N.C. The group wants to grow AutoNation USA to more than 130 locations by the end of 2026.
This week, the company said in a regulatory filing that it plans to sell 17 of its collision centers — about a quarter of its count — to Caliber Holdings in a deal slated to close by year's end.
Meanwhile, during the third quarter, AutoNation spent $879 million to buy nearly 11 percent of its own shares, while the board authorized $1 billion in buybacks.
Shares of AutoNation rose 7.7 percent to close Thursday at $126.
Q3 revenue: $6.38 billion, up 18 percent from a year earlier
Q3 net income: $361.7 million, up 98 percent from the $182.6 million earned a year earlier
Q3 vehicle sales: 135,830 combined new- and used-vehicle sales, up 4 percent
Records: Same-store new-vehicle gross profit per vehicle of $5,484 and same-store finance and insurance gross profit per vehicle of $2,573
AutoNation, of Fort Lauderdale, Fla., ranks No. 1 on Automotive News' list of the top 150 dealership groups based in the U.S., retailing 249,654 new vehicles in 2020.