Troubled Investor Reduces His AutoNation Holdings

Edward Lampert once was the darling of Wall Street. Not anymore.

Marty Bernstein

February 26, 2020

3 Min Read
Mike Jackson
AutoNation grew under former CEO Mike Jackson’s aggressive leadership.

Once upon a time, Edward S. Lampert, aka Wall Street Wunderkind and the next Warren Buffett, was riding high.

His stock purchases in AutoNation, AutoZone and a massive hedge fund were praised by analysts and investors.

But in a convoluted, ill-conceived financial flip, he bought Kmart, then Sears, once America’s top retailer, but certainly no longer so.

Lampert had the “touch of a genius,” said many analysts. But overnight his reputation morphed – Kafka-like – from being a marketing-merchandising maven to that of just another maligned merchant.

The list of poor business decisions for Sears and Kmart included key personnel layoffs and firings, multiple store closings, killed expansion plans, the selling off of profitable units and misguided marketing.

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At one time, Lampert and Bill Gates (yes, that guy) were two major AutoNation stockholders through special investment accounts.

AutoNation is the country’s largest dealership chain, perennially No.1 on the Wards Megadealer 100. Its revenues are more than $21 billion. It sold more than 613,476 vehicles.  (Lampert, left)

Many investors have benefited from a rise in AutoNation’s stock price following the 2008 financial disaster (from nine dollars and change to a high point of $60.42 per share). As this article is being written, the closing price of AN on the New York Stock Exchange was $48.37 per share.

Facing all sorts of financial hurdles, did Lampert sell Fountainhead, his $130 million, 288-ft. (86.4-m) yacht? No.

What about the Bombardier 500 jet? No.

How about the one-percenter Connecticut mansion? Ha!. His multi-million-dollar Florida home on a semi-private island reachable only by water? Ditto.

Lampert loaned Sears huge shopping baskets full of money to keep it afloat. His net worth is still estimated at $3.5 billion.

Then in late in January Lampert sold two big lots of AutoNation stock between $45.08 and $45.73 a share. Curious.  

Why did Lampert sell AutoNation stock?

Lampert’s not talking on or off the record, but his selling stock seems counterintuitive to the retail behemoth’s results. Under former CEO Mike Jackson’s aggressive leadership, AutoNation grew, set new standards for consumer-friendly online buying, used aggressive marketing and branding, focused on customer service, adopted new technologies, created new profit centers, improved sales procedures and pioneered ventures with high-tech companies such as Alphabet’s Waymo and SiriusXM, which just announced an OnStar-like option.

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CherylMiller CEO (002)

Cheryl Miller, AutoNation’s new CEO (formerly CFO) earlier this month fielded complex financial, marketing and merchandising questions about the company’s financial results.

The questions came from Wall Street’s analytical bulldogs and CNN, which always seems interested in the company. (Cheryl Miller, left) 

AutoNation’s quick reaction last year paid off as the market moved from sedans to CUVs. It also amped up its used-car sales as new-car prices increase.

What’s ahead for Lampert and AutoNation?

AutoNation, its competitors and the OEMs are moving into dramatic changes in the retailing of automobiles. There is the probability of self-driving vehicles, the possibility of looser franchise laws, new competitors in electric vehicles and tests of the viability of an automotive shopping center in newly vacant shopping center space. (Shuttered Sears stores presumably would make nice dealership display areas.)

The secretive Lampert doesn’t reveal much about his plans. In contrast, AutoNation shares a lot about what it is up to. It’s an early adopter, not necessarily a disrupter. It’s doing fine. The former Wall Street Wunderkind can’t say the same. 

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