FORT LAUDERDALE, Fla. -

Though still challenged by Japanese inventory issues in the third quarter, AutoNation’s net income from continuing operations soared more than 20 percent, and the retailer achieved its best-ever third quarter for earnings per share from continuing operations.

In addition to revealing its quarterly earnings on Thursday, AutoNation revealed that its board of directors has given the company approval to repurchase as much as an additional $250 million in common stock. Previously, AutoNation had bought-back 7.2 million shares — totaling $247.7 million — from July 1 through Wednesday.

As such, the company has about $316 million left in repurchase funds authorized by the board.

Quarterly Results, Inventory Update

Sharing more about the quarterly results, AutoNation said it pulled in operating income of $144.1 million, which marked a 19.2-percent increase from the year-ago period. This was thanks largely to hefty gross margins for new-vehicle and F&I sales,

Net income from continuing operations totaled $71 million, up 20.3 percent year-over-year.

“This quarter, we once again demonstrated that our diversified business model is the right strategy as well our ability to rapidly adapt to change and institute effectively in a changing marketplace,” said chairman and chief executive officer Mike Jackson in Thursday’s earnings conference call. “In light of the Japanese supply constraint, we adjusted our operating plan to optimize our inventory maximize gross profit.”

Jackson noted in the earnings release that AutoNation “continued to deliver solid double-digit growth in operating income in the third quarter, which was driven by strong gross margins in new vehicles and finance and insurance.”

“While shipments from the Japanese manufacturers improved in the third quarter, inventory levels of these vehicles remained constrained,” he continued. “We would expect that the improving supply environment will result in lower margins on these vehicles in the fourth quarter.”

The retailer is scheduled to get a shipment of more than 30,000 Japanese units in the fourth quarter. Ordinarily, Jackson said, the company would have been happy with 27,000. In the third quarter, the company received less than 20,000 Japanese vehicles “and even less than that in the second quarter,” Jackson stressed.

New-inventory levels for Japanese brands at AutoNation are expected to hit “normal” levels in the first quarter, possibly into the second, “depending on how the selling rate goes,” Jackson said in the call.

“The point is we’ll have shipments, we’ll have good, fresh inventory that’s aligned with what customers want. But to really restock is going to take some kind of shipments above 100 percent of market demand,” he added.

Meanwhile, president and chief operating officer Mike Maroone shared some details about inventory on the used-car side. In the call, he noted that days’ supply was at 43 as of Sept. 30. A year ago, days’ supply was 46, and at the end of the second quarter, it was at 47 days.

Maroone noted, “We continue to move used vehicles to locations that will drive a faster turn and higher gross.” The company reduced used inventory in quarter “to better prepare for seasonal pricing changes we experienced moderate wholesale loss.”

More Quarterly Results

Moving along to discuss the third-quarter results in more detail, quarterly revenues increased from $3.3 billion to $3.5 billion. AutoNation attributed the year-over-year gain to higher average selling prices for new and used vehicles.

The retailer saw its revenue climb across the board, as new- and used-vehicle, parts and service and F&I revenues all went up.

New-vehicle revenue climbed 6.1 percent, used revenue was up 12.2 percent, parts and service revenue climbed 2.5 percent and net F&I revenue saw an 8.9-percent uptick.

The dealership group sold 56,309 retail new vehicles in the third quarter, compared to 56,121 units in the year-ago period. AutoNation posted 44,226 used retail sales, up from 42,904 in the third quarter of 2010.

Moving along, the company also broke the quarter down by its three operating segments — domestic, import and premium luxury.

AutoNation indicated that its domestic business segment hit income of $47 million, up from $43 million a year ago. There was 12-percent growth in retail new-vehicle sales for this segment.

On the import side, AutoNation pulled in revenue of $65 million, up from $51 million. There was a 10-percent drop in new retail sales.

Meanwhile, premium luxury income climbed from $48 million to $50 million, and new-car sales climbed 11 percent.