Asbury Reports Q3 Net Income of $12.5 Million

Higher used-vehicle sales are helping boost revenue in two other key departments at Asbury Automotive Group Inc.

“Our focus on increasing used-vehicle sales also increases opportunities for (finance and insurance) and parts and service,” Asbury CEO Charles Oglesby said Tuesday after the public retailer reported third-quarter net income of $12.5 million, a 69 percent gain.

Revenue rose 9 percent to $1.1 billion, helped by a 19 percent gain in used vehicles, a 6 percent hike in new vehicles, 2 percent in parts and service and 21 percent in F&I. The spike in used vehicle sales gives the service department more reconditioning work to prep the units for sale and gives F&I more customers for its products.

“When you have north of 20 percent increase in volumes quarter after quarter, we know that it is impactful on parts and service,” Asbury COO Michael Kearney said in an interview. “As far as the impact on F&I, I'm not convinced that selling more used cars is impactful on the per-vehicle-retailed (amount). It is on the total gross dollars, of course.”

Asbury's retail revenues for used light vehicles rose 23 percent on a same-store basis during the third quarter.

A year ago, the dealer group earned $7.4 million on revenue of $1 billion.

For the first nine months, Asbury posted net income of $32.7 million, up from $13.2 million during the same period last year. The company reported revenue of $3.12 billion during the period, up from $2.76 billion during the same nine months of 2009.

Car shoppers have remained cautious and are waiting longer to buy vehicles amid a sluggish economic recovery and stricter lending standards, Kearney said.

"We're seeing a lot of 'need buyers,' people who have older vehicles that they've decided they don't want to maintain anymore," Kearney said. "We're also seeing higher mileage vehicles in the shops."

In an interview with Reuters, CEO Charles Oglesby projected that industry-wide sales would rise between 7 percent and 8 percent in 2011 from 2010 levels.

Retail sales -- or sales excluding cars sold to high-volume fleet operators like rental car companies -- could be around 9.5 million for 2010, he added. In 2011, retail sales could be around 10.5 million or above, he said.