After dropping below $5 a share during the depths of financial crisis, shares of AutoNation (AN) are hitting all-time highs at nearly $50. True believers who invested in the struggling auto industry during the dark days of 2008 are now seeing stellar returns.
In our special series Breakout Profiles, we explore what's next for our nation's largest auto dealer.
For starters, they can change the way car dealers have done business for the last 100 years. AutoNation is in the process of branding all of its more than 200 stores nationwide. Once finished, every dealership in its network will be under the company flag.
AutoNation's goal is to create brand efficiencies in advertising and to standardize the customer experience. The risk is that consumers won't take to buying cars from a mass-merchant, in turn abandoning the family-run dealership they've done business with for years. AutoNation only has one shot at making the change effectively — or it will hurt their brand for years. The company's Chairman & CEO Mike Jackson isn't worried about the challenge.
"We've invested $3.7 billion in expanding facilities and new technology, in processes, in acquiring different car lines to give a broader offering," Jackson says in the attached video. "So we've been preparing for this day for 13 years, and we're ready."
The stock has been a huge winner for investors over the last four years, but what they should do now? If they take their cue from Jackson, investors will buy the stock. The company has been a massive buyer of its own stock over the last 10 years, putting AutoNation not just in the car business, but also in the role of fund manager, of sorts.
Jackson makes no apologies. "We invested $7 billion in share repurchase over the last 10 years, buying in almost 400 million shares at an average price of $17 a share for a stock that's now trading at $47," Jackson says. "I created a lot of shareholder value, so if I'm out of favor I'll be buying the stock."
So far the economy hasn't given Jackson and his team any reason to think the recovery in auto sales is fleeting. Jackson says his customers never paid attention to the fiscal cliff debate and don't care much about the nature of other economic data; they know their cars are old, and they have the money to upgrade.
"The American consumer has said, 'Look, I put my life on hold in '08, '09 and '10... I had my own austerity program. I've straightened out my balance sheet. I'm moving on with my life.'"
AutoNation has moved on, as well. There's no going back to the local dealership model for the company. It remains to be seen whether or not customers and shareholders will come along for the ride.