Yahoo Finance’s Brian Sozzi and Julie Hyman speak with AutoNation CEO Mike Jackson about the company’s huge earnings beat, state of the auto industry, outlook, and his long tenure at the company.
BRIAN SOZZI: After 22 years, the CEO of AutoNation, Mike Jackson, will retire on November 1, and he's clearly going out on top and offering up some final presents for investors. The auto retailer smashed analyst profit estimates this morning, announced a new $1 billion stock buyback plan, and said it has acquired luxury auto dealer Priority 1 Automotive.
AutoNation CEO Mike Jackson joins us now. Mike, good to see you here this morning.
We've been talking all year long to you about the supply-and-demand dynamic in the auto-retailing space. Has there been any improvement in the supply or flow of cars onto your lots?
MIKE JACKSON: So, listen, we've been talking all year, and AutoNation had a clear strategy. We were going to give our customers choices. And we knew if we were able to present them nearly new preowned vehicles, that would be a price point and a full-featured vehicle that they would seriously consider, and that strategy has really worked.
Look at our revenue in preowned for the quarter, up 53% year over year. And now you combine that with pricing steps on the new-vehicle side due to the shortages, our confidence in the future. So we repurchased 11% of the outstanding shares in the third quarter, 27% of the outstanding shares in the past year. So revenue growth combined with profit growth, reducing the share count-- we have 115% improvement in earnings per share.
So clearly we've demonstrated that our brand, our digital platform, our customer experience is adaptable, and we can seize opportunities whatever the marketplace throws at us.
JULIE HYMAN: I want to talk about pricing for just a second, Mike, specifically of those used vehicles because we on the show like to talk about and focus on, say, in the retail sales or in the CPI, focus on that used-vehicle component. But I'd love to hear from you because you're on the ground. You're the one charging those prices. So what's happening with those used-vehicle prices? Are we seeing some moderation there? Are you able to offer deals to folks?
MIKE JACKSON: So first what is being missed is what we're paying consumers for their preowned vehicle. So consumers think about an auto transaction as the difference between what their vehicle is worth and what they have to pay for the new one, and their vehicles are worth more than ever. And so you say, you know, how can consumers be so happy considering what's happening on the pricing side? Well, the value in their vehicles have gone up over the past several years, and we're clearly paying for it. So consumers are actually delighted with this, and the difference really hasn't dramatically opened that much and the reason we're able to do this kind of volume.
So consumers are very understanding then on the purchase side that there are tremendous shortages on the new vehicles, and there are appropriate price changes because of that and on the-- same thing on the preowned. They know the value.
There's tremendous demand for personal transportation, as we've talked all year. I don't see that changing. There's also thousands and thousands of customers that have told us they're waiting to get exactly what they want in 2022 when production is more normal. So there's tremendous pent-up demand rolling into next year.
But our strategy of giving the consumer choices at appropriate market pricing is working well for the consumer and obviously is very compelling for AutoNation.
BRIAN SOZZI: Mike, what do consumers want as they are either buying a car now or telling you they might return next year? Are they sold yet on electric cars, or are their next cars still likely to be gas powered?
MIKE JACKSON: Well, one thing I will say for the manufacturers that they manage through this production disruption is they have prioritized producing what people want to buy. And that is, in principle, truck-based vehicles, either as SUVs or pickup trucks, and they like them full featured.
So the customers are telling us to wait. We have many vehicles being produced that certain features are left out that are comfort features simply because they take a lot of chips, and the chips don't exist. Now if the vehicle is produced missing some safety device, well, then we don't sell it. We wait until the chip is available or the component that has the chips in it is available. Then we complete the vehicle and sell it to the consumer. And there are those customers, as I said, who simply say, look, I need every feature, and I'm going to wait until '22 until the situation is different.
Now, the inflection point for electrification, the industry's movement to electrification has crossed the Rubicon. There is no turning back. We have exciting electric vehicles already here or about to come, whether it's the Mercedes EQS or the General Motors Hummer. There are absolutely fantastic electric vehicles. We have a whole portion of our website dedicated to electric vehicles, and we fully embrace it and look forward to it. But the internal-combustion engine is going to remain as the majority of the vehicles sold and the majority of the vehicles on the road of America for many, many, many years to come.
JULIE HYMAN: Mike, as you get set to step down and retire as CEO of the company, as Brian said, obviously you've built an incredible company here and you leave it in good stead. What do you think is going to be the biggest challenge for AutoNation specifically and maybe the car industry more broadly going into the next decade?
MIKE JACKSON: Well, certainly there's always going to be challenges. That's my experience from 50 years in business. The challenges never end. But what I'm thrilled and excited about is we will have a world-class CEO that's going to arrive as my successor, Mike Manley, who's the former CEO of Fiat Chrysler and is the head of the Americas for Stellantis. And he is simply a world-class, admired, respected executive, and we're thrilled to have him.
Now, what I particularly like about Mike is that he started his career at retail back in England outside London. So he understands the difficulty of selling things one at a time and fixing them one at a time.
Now, even though he and I have spoken at length, listen, it's a dynamically changing marketplace that will present challenges and opportunities. But what we both agree is AutoNation with a national brand, a great customer experience, and a digital platform is uniquely positioned to both meet the challenges and seize the opportunities.
BRIAN SOZZI: Mike, I know you have a retirement road trip planned, no? Well deserved.
MIKE JACKSON: Listen, I don't know how many million miles I have around the world. I got to sit down and add it up. So I'm looking forward to November 1. The new CEO, Mike Manley, pulls in, and I'm going to take a little vacation. But I haven't had a minute to think about where that will actually be, but favorite spots are, of course, Germany. I love no speed limits on the autobahn and enjoying that legally. And, of course, the food in Italy and the people in Italy are fabulous, and there are many other places in the world. And America is the best from coast to coast. So I'm excited.
BRIAN SOZZI: Well, well-deserved retirement. Please don't be a stranger. AutoNation CEO Mike Jackson, good to see you. Way to drop the mic here and go out on top.