DULUTH, Ga. — Challenges and opportunities were the recurring themes of a first-quarter investor call held by executives representing Asbury Automotive Group. America’s seventh-largest auto retailer posted modest improvements in new- and used-vehicle sales, profits, and F&I production while adding stores and users to two recently launched digital sales and finance platforms.
Executives tempered their reporting of F&I numbers — and parts and service performance — by noting that a switch to a new accounting standard for revenue reporting had an unspecified negative effect. Nevertheless, F&I revenue and gross profit per retail unit both improved by 2%. PRU averaged $1,159 for the quarter, up $44 from the year-ago period.
The group’s total revenue and gross profit were up 2% and 1%, respectively, compared to the first quarter of 2017. New-vehicle gross profit fell by 6% but was offset by a 7.3% gain in used-vehicle gross profit. Fixed ops returns were highlighted by a 5% year-over-year improvement in customer-pay gross profit.
“Our plan for the remainder of 2018 is to focus on the aspects of the business that we can control — specifically, parts and service, used cars, F&I, and overall expense management — while continuing to intelligently deploy capital towards the highest return, be that strategic investments in our existing business, notably our omnichannel capabilities, acquisitions, or returning capital to shareholders,” said Asbury’s president and CEO, David Hult.
Investors received a progress report on the group’s embrace of two “omnichannel” digital platforms, both of which drew nearer to full adoption in the first quarter:
• A centralized, “brand-certified” digital sales support team now works with one-quarter of all Asbury dealerships and is credited with a 20% increase in lead-conversion rates. Executives predicted the team will support every Asbury dealership within the next 18 months.
• “Pushstart,” an online sales tool designed to allow car buyers to select, buy, and finance a vehicle from home and request driveway delivery for closed deals. Launched last year, sales that started through Pushstart accounted for 7% of all the vehicles Asbury dealers sold in the first quarter.
Asbury also announced the acquisition of its second Indiana dealership (following last year’s acquisition of Hare Chevrolet), which is expected to contribute $120 million in annual profits, as well as the impending purchase of two “underperforming” Atlanta-area stores.
“We are confident that by applying our existing brand recognition, management expertise, and omnichannel capabilities, we can successfully turn these stores around,” Hult said. “Given the turnaround situation, we expect to generate a higher return to compensate for the additional execution risk.”
Remarkably, for the second consecutive year, an April hailstorm caused significant damage to an Asbury dealership in the Dallas/Fort Worth area. This year’s incident caused an estimated $1 million in damages to inventory at an Irving store, a far cry from the $20 million worth of dents, dings, and broken glass suffered by two Asbury dealerships located along the famed Plano Parkway in April 2017.
Originally posted on F&I and Showroom