Strategy vs. tactics: AN fails to execute

Rohit Khare (
Mon, 13 Dec 1999 15:46:30 -0800

[A fragmented industry, cheap capital, better IS and service... it
shoulda worked, but... --RK (who owns .00005% of AN, and 30%
underwater for it...)]

[.. down to $8.50 in after-hours. Hey, at least now it's a P/E of
5.6. Time to go buy some YHOO to average that out :-) It's selling
for less than three-quarters of its book value, though I suppose the
charge may bring it back to "only" selling at book value]

AutoNation Charge Could Reach $490 Million As It Exits Used-Auto Market
Monday, December 13, 1999 05:38 PM ET

FORT LAUDERDALE, Fla. -(Dow Jones)- AutoNation Inc. said late Monday
it will immediately close 23 megastores, eliminate 1,800 positions
and fall short of fourth-quarter earnings estimates as the nation's
largest automotive retailer exits the used-vehicle market.

AutoNation said the costs associated with the megastore closures, a
previously announced work-force reduction at its corporate
headquarters and other corporate restructuring will result in a
pretax charge to fourth-quarter earnings of between $430 million and
$490 million.

The company also expects 1999 fourth-quarter earnings from continuing
operations, before the charge, to be approximately 10 cents a share.
The mean estimate of five analysts surveyed by First Call/Thomson
Financial puts the company's fourth-quarter earnings at 19 cents a

The shortfall in the quarter is attributed to poor performance at the
company's used vehicle megastores, and higher selling, general and
administrative expenses.

To exit the used vehicle megastore business, AutoNation said it plans
to immediately close 23 of the megastores and integrate six other
with new vehicle franchises.

The company said it already has integrated eight megastores with new

AutoNation said the closure of the 23 megastores won't hurt the 409
automotive retail franchises that sell new and used vehicles under
various regional brand names.

The company said it will continue to honor its warranty and service
obligations for megastore customers, who may receive services at the
company's automotive retail franchises.

AutoNation said it also expects to set a record date in January for
the spinoff of its ANC Rental Corp. operations.

The company expects to complete the distribution by the end of
February. AutoNation shareholders will receive one ANC Rental share
for every six to eight AutoNation shares held.

AutoNation's New York Stock Exchange-listed shares (AN, news, msgs)
closed at $9.438, down 50 cents, or 5%, on Monday.

AutoNation also announced it plans to repurchase an additional $500
million of its common stock.

The company said it has repurchased about $1.2 billion of its common
shares since August.

The automotive retailer has about 429.7 million average shares outstanding.

Separately, AutoNation Chief Executive Mike Jackson said the company
has set a target of 90 cents a share for earnings in 2000, up from
estimated annual earnings of 66 cents a share for 1999.

The 2000 EPS target is in line with analysts' expectations, as
compiled by a survey from First Call/Thomson Financial.