From an interview in Reuters…
Tag: AN
From an interview in Reuters…
Mike Jackson CNBC 8-19-2009 from http://marccannon.vox.com/
Disclosure (“none” means no position):
From “considering acquisitions” to “on the hunt” in a month. Great news
Here is the appplicable portion of the interview:
Because of the significant improvements from the financial turmoil that befell the U.S. financial markets last year, and AutoNation’s ability to weather this most recent downturn, the company has begun to ramp up its orders for new cars and trucks …..AutoNation is also “on the acquisition hunt”.
The conditions for opportunity are beginning to outweigh the recent “risk environment” for the company, Mike Maroone concludes, ….consequently, AutoNation will be moving forward.
Mike Maroone on NBC 8-12-09 from http://marccannon.vox.com/
AutoNation has already gobbled up market share where it does business and acquisitions will multiply that effect. Note, this may not translate into dramatically more “metal moved” but will mean better pricing (although one has to expect more than 2008). When you couple that with the cost cuts already enacted, that is a very good recipe for earnings growth….
Disclosure (“none” means no position):Long AN
From “considering acquisitions” to “on the hunt” in a month. Great news
Here is the appplicable portion of the interview:
Because of the significant improvements from the financial turmoil that befell the U.S. financial markets last year, and AutoNation’s ability to weather this most recent downturn, the company has begun to ramp up its orders for new cars and trucks …..AutoNation is also “on the acquisition hunt”.
The conditions for opportunity are beginning to outweigh the recent “risk environment” for the company, Mike Maroone concludes, ….consequently, AutoNation will be moving forward.
Mike Maroone on NBC 8-12-09 from http://marccannon.vox.com/
AutoNation has already gobbled up market share where it does business and acquisitions will multiply that effect. Note, this may not translate into dramatically more “metal moved” but will mean better pricing (although one has to expect more than 2008). When you couple that with the cost cuts already enacted, that is a very good recipe for earnings growth….
Disclosure (“none” means no position):Long AN
Before you slough this off as being “years away”, take a look at where we are going with this already. AutoNation (AN) has teamed with Velocitude to give it the first smart phone friendly auto dealer website out there.
Currently users can search for a vehicle using several parameters (price, type, make etc.) and then located one at a nearby dealer. In the future users will be able to schedule a service appt. from their smart phones and, get notifications when a specific vehicle they want is available near them.
What will this do for AutoNation?
• Drive Transactions:
Allow customers to search for new and used vehicles anywhere, anytime. They will also enabled customers to schedule service appointments in real time from their mobile device. This will make Service Programs much more effective.
• Capitalize on Lost Sales Opportunities:
Consumers are frustrated from mobile web browsing because most websites are designed for desktop and laptop browsing. AN’s new Mobile Platform will make its business easily accessible and usable from almost any mobile device.
• Increase Effectiveness of Marketing Campaigns:
Expand reach of Promotions, Loyalty Programs and Coupons through a mobile device.
• Build Brand Awareness:
Create excitement around product introductions. Share product usage benefits.
• Deliver an Improved Customer Experience:
After deployment, AN will use our mobile analytics to constantly improve the relationship
between them and their customers.
So is this a panacea for AutoNation? No, but it does move the needle more towards them. Already gaining market share as thousands of dealers across the US shutter their doors, this is another move to help AutoNation to pull away from the pack. It is about branding.
Think of it this way. You are a car buyer looking for another Chevy Suburban for your family. There may be 4 or 5 dealers within 20 miles of you depending where you live. If you are out looking for cars, now at any location you can find a vehicle you may like at a price you want to pay on the road, at your leisure. What AutoNation is doing is giving potential buyers another reason to choose their dealers over the others. They are moving the auto dealership model into the comfort zone of a growing percentage of auto buyers. That can only help as we move forward from 2008-09.
As this site becomes more interactive with users, its benefits will grow. It will be interesting to watch that unfold.
What does Velocitude do?
VELOCITUDE puts your business in the hands of your customers by taking the content of your existing website and making it available in a format customized for a mobile device.
When browsing the web from a mobile device, such as an iPhone, Blackberry, Palm or Android,
today’s consumer wants an experience similar to that obtained on their computer. We meet that
need. Our Mobile Platform also enables updates to be made in real-time to your mobile site as
changes are made to your main website — with no strain on your internal IT resources.
Disclosure (“none” means no position):Long AN
AutoNation, Inc. (NYSE: AN), America’s largest automotive retailer, today reported 2009 second quarter net income from continuing operations of $55 million or $0.31 per share, compared to year-ago net income from continuing operations of $56 million or $0.31 per share. After adjusting for certain items disclosed in the attached financial tables, net income from continuing operations for the 2009 second quarter was $51 million or $0.29 per share, compared to $59 million or $0.33 per share in the prior year.
Second quarter 2009 revenue totaled $2.6 billion, compared to $3.7 billion in the year-ago period. The decrease was driven primarily by lower new vehicle sales. In the second quarter, total U.S. industry retail new vehicle sales declined 40% compared to last year, based on CNW Research data. In comparison, in the second quarter AutoNation’s new vehicle unit sales declined 38%.
Commenting on the second quarter, Mike Jackson, Chairman and Chief Executive Officer, said, “Despite extraordinarily difficult industry conditions, AutoNation delivered solid profitability, driven by cost reduction, lower interest expense, and our disciplined operating model and inventory management. The second quarter was a pivotal moment for the automotive industry. Long-awaited volume stabilization, the successful government-led restructuring of General Motors and Chrysler, and significant dealer consolidations were accomplished. The industry is now positioned for a healthy rebound when macroeconomic conditions, particularly consumer credit, improve.” Mr. Jackson also noted, “Our continued disciplined inventories led to a year-over-year improvement in gross profit per vehicle retailed and lower floor plan expense.”
Mike Jackson added, “The stabilization of the SAAR in the second quarter is the first step to a gradual recovery and marks the first time since the end of 2007 that we did not see a significant sequential decline in industry new vehicle sales. We also expect the ‘Cash for Clunkers’ program to stimulate new vehicle sales. Going forward, we expect a gradual improvement of new vehicle sales beginning in the second half of 2009 and intend to increase our inventory of vehicles in a disciplined manner to meet demand. Having weathered the storm, AutoNation remains in an excellent position to capitalize on dealer consolidation and the gradual recovery in industry volumes. We will continue to benefit from our $200 million structural cost reduction program.”
At the end of the second quarter, AutoNation had nearly $450 million in liquidity, including cash of $129 million and remained well within the limits of the financial covenants in our debt agreements.
AutoNation has three operating segments: Domestic, Import, and Premium Luxury. The Domestic segment is comprised of stores that sell vehicles manufactured by General Motors, Ford, and Chrysler; the Import segment is comprised of stores that sell vehicles manufactured primarily by Toyota, Honda, and Nissan; and the Premium Luxury segment is comprised of stores that sell vehicles manufactured primarily by Mercedes, BMW, and Lexus.
• Domestic —Domestic segment income for the second quarter of 2009 was $26 million compared to year-ago segment income of $33 million. Second quarter Domestic retail new vehicle unit sales declined 34%.
• Import —Import segment income for the second quarter of 2009 was $42 million compared to year-ago segment income of $57 million. Second quarter Import retail new vehicle unit sales declined 41%.
• Premium Luxury —Premium Luxury segment income for the second quarter of 2009 was $43 million compared to year-ago segment income of $52 million. Second quarter Premium Luxury retail new vehicle unit sales declined 34%.
For the six-month period ended June 30, 2009, the Company reported net income from continuing operations of $108 million or $0.61 per share compared to $111 million or $0.62 per share in the prior year. After adjusting for certain items as disclosed in the attached financial tables, net income from continuing operations for the six-month period ended June 30, 2009 was $91 million or $0.51 per share, compared to $114 million or $0.63 per share. The Company’s revenue for the six-month period ended June 30, 2009 totaled $5.0 billion, down 32% compared to $7.4 billion in the prior year.
CEO Jackson on the morning shows:
Mike Jackson on CNBC 7-31-2009 from http://marccannon.vox.com/
Mike Jackson on Bloomberg 7-31-2009 from http://marccannon.vox.com/
I spoke with Jackson and Maroone after earnings were released and there were a few comments worth sharing:
- The $1 billion (as of last Friday) spent on cash for clunkers did more to stimulate the economy than “the entire previous $750 billion” according to Jackson
- For the first time in over a year, Jackson appears open to the idea of making an acquisition
- Dealership closures nationally are “about 80% done”
- He is now satisfied with having domestic dealership make up 30% of his portfolio after the changes the companies have gone through
- Given a choice, Ford (F) is now the clear favorite among the domestic automakers with customers due to their lack of a bailout
- Banks are beginning to lend again although they are requiring larger down payments
- Speculation that families are downsizing the number of vehicles they own is temporary and not a trend
- The decision to let Lehman go under “was a catastrophic failure”
- The industry bottomed in February and will continue a slow climb out
This is a great company that is really well run. In every category their declines are less than the industry as a whole and any positive increases they are seeing exceed the industry as a whole. Their market share continues to increase and the new business model at the auto maker level is going to increase pricing power.
Jacskon said he thinks the days of 16 million units a year are gone for a while but that with the new pricing power dealerships will have, they will not need anywhere near that number in order to post very strong profits.
Here is the Q2 earnings call transcript
Disclosure (“none” means no position):Long AN, none
Categories
"Cash for Clunkers" Calculator
Everyone has heard about the “cash for clinkers” program but not too many people know if it is a good deal. well, here is some help.
Make sure if you decide to do it to visit your local AutoNation (AN) dealership…
Disclosure (“none” means no position):Long AN
Categories
AutoNation Launches YouTube Channel
AutoNation (AN) is taking a unique tact….very unique.
AutoNation says:
Our strategy was to demystify the car buying experience through video. This video was created as a highlights clip to show what you can expect to see from car reviews to how to purchase the right vehicle. Stay tuned, we have more content being relased in the next few months.
Now admittedly the first video is a bit more like a commercial than informative car buying video but as more and more car buyers are part of the YouTube Generation, engaging them in their preferred medium is a great strategy. If the channel is done right and made informative, it becomes both a sales and consumer research channel and the brand loyalty that can be created from that is huge.
From a pure business standpoint it is a very cheap effort that has potentially huge upside if it is done right. If they muck it up the downside is minimal….
Disclosure (“none” means no position):Long AN
Categories
Lampert Sells More AutoZone Shares
In a just released SEC filing…Sears Holdings (SHLD) Chairman Eddie Lampert’s ESL Investments and RBS Partners sold another 175k shares of AutoZone (AZO) and an avg. price of $157 a share
I will reprint a previous post here as to my reasoning for the sale
Remember this agreement from last year?
AutoZone also announced that it has entered into an agreement with ESL Investments, Inc. (with its affiliates, “ESL”) setting forth certain understandings and agreements concerning ESL’s continued investment in AutoZone. ESL currently owns approximately 36.2% of the outstanding AutoZone common stock. Pursuant to the agreement with ESL, the Company has agreed to use its commercially reasonable efforts to achieve at least the new 2.5x adjusted debt / EBITDAR leverage metric by the end of the Company’s second quarter fiscal 2009.
“We are very pleased to have reached this agreement with our long-term and significant stockholder, ESL, which was motivated, by our desire to continue to return excess capital to stockholders in the context of appropriate, mutually agreed governance arrangements,” said Bill Rhodes AutoZone’s Chairman, President and Chief Executive Officer. “We appreciate ESL’s belief in the Company and its management over the past eleven years and look forward to its continued involvement in helping us achieve our goals for the benefit of all stockholders.”
The agreement with ESL provides, among other things, that, should ESL’s percentage ownership of Company shares increase above certain thresholds, ESL will vote its shares owned above such thresholds in the same proportion as shares unaffiliated with ESL are actually voted. The initial threshold is 40%, which will reduce to 37.5% following the 2009 annual meeting of stockholders. The agreement also states the Company’s intention to add three directors in the near future, two of whom will be identified by ESL for consideration by the Company’s Nominating and Corporate Governance Committee, thereby increasing the Board’s size to 12 members. Thereafter, the Company expects to reduce the Board’s size to 10 members in conjunction with the 2008 annual meeting in December. The agreement also contains certain other protections for non-ESL affiliated shareholders as well as for ESL.
The agreement with ESL or certain of its provisions will terminate, except as the parties otherwise mutually agree, upon the earlier of the date upon which the shares (a) owned by ESL constitute less than 25% of the then outstanding shares or (b) owned by ESL constitute more than 50% of the then outstanding shares, provided that ESL has acquired subsequent to the date of the agreement additional shares representing above 10% of the then outstanding shares.
Then his news from last week?
AutoZone Inc (AZO.N), the leading U.S. auto parts retailer, said on Wednesday its board had authorized another $500 million to buy back common stock.
Shares in the Memphis-based company have gained almost 12 percent since the start of the year as the U.S. recession has prompted more consumers to drive cars longer and shop for better deals on replacement parts.
“AutoZone’s strong financial health has allowed us to continue to repurchase our stock while operating within our targeted leverage metric,” said AutoZone Chief Financial Officer Bill Giles said in a statement.
In late May, AutoZone posted a 9-percent gain in profit that topped analyst estimates.
Billionaire investor Edward Lampert and his ESL Investments owns about 43 percent of AutoZone (prior to recent sale). Lampert is also the largest shareholder in AutoNation (AN), the largest U.S. auto dealership chain.
So, Autozone is upping its leverage ratio and using it to repurchase shares. Lampert’s recent sale lower his ownership to below the 37.5% threshold so he may vote his shares as he wishes and maintains board representation.
What happens now? As Autozone completes their repurchase (approx $600m left) they will have reduced the outstanding shares (at today’s prices) by 7.5%. That sale also triggered a 6% drop in the stock price so that $600, will repurchase moire shares. In essence, Lamper sold shares for a nice profit and then Autozone will repurchase shares to increase his ownership once again back to the mid 40% range.
Why not hold them to get to the 50% threshold? The agreement above requires Lampert “to acquire” additional shares to the gain benefits from being at/above 50% in terms of voting. One can only assume he sees no “value” in shares at these prices (they aren’t) and therefore does not want to buy more. Doing it this way he can free up capital and have the company maintain his ownership level for him.
Nice….
On another note, Autozone, in my opinion is nearing an earnings peak. With auto sales at decade lows they have benefited from the repair biz. If “cash for clunkers” does increase sales as predicted by AutoNation CEO Mike Jackson, that will directly negatively impact Autozone’s biz. Perhaps another reason Lampert is not buying more???
Disclosure (“none” means no position):Long SHLD, none