Asbury Automotive Group Prioritizes Gross Profit Over Volume Amid Q3 Results

Asbury Automotive Group’s president and CEO, David Hult, emphasized the company’s focus on gross profit over unit volume in the used vehicle market, as reflected in the third-quarter financial results. Although same-store used-car sales declined by 6% year-over-year, Hult remained unconcerned, drawing attention instead to an improvement in gross margins quarter-over-quarter.

In an earnings call this week, Hult explained that the company had decided to prioritize gross profit rather than volume. While used-car retail gross profit dropped 6% year-over-year to $56.1 million, gross profit per unit fell 19% to $1,501, and gross margin slipped from 5.9% to 4.9%. Yet these figures remained stable compared to year-to-date 2024 levels. Hult remarked that until inventory levels normalize with more off-lease vehicles returning — a shift he anticipates is still a year away — the company would adopt a conservative stance on unit sales, focusing instead on profitability.

In addressing the company’s expenses, Hult highlighted a reduction in selling, general, and administrative expenses as a percentage of gross profit, which he attributed to ongoing cost-cutting measures.

Senior Vice President of Operations Dan Clara elaborated on Asbury’s strategy to improve margins in the used-car sector by concentrating on trade-ins and local acquisitions while avoiding auction purchases, which tend to yield lower margins. Clara explained that processes are in place to enhance trade capture and inventory acquisition through the service department, in addition to utilizing loaner vehicles as they become available, all aimed at maximizing profitability. When inventory availability rebounds, the company will reassess its stance on volume expansion.

The company noted that Hurricane Helene had impacted third-quarter unit sales in affected Florida, Atlanta, and Greenville, South Carolina markets. Despite this, Hult observed that among Asbury’s dealership group competitors, only one company had outperformed Asbury in limiting sales declines.

Overall, Asbury posted year-over-year revenue growth of 16% to $4.2 billion and a 7% rise in gross profit to $718 million, primarily driven by the parts and service segment, which saw a 13% increase in revenue and a 16% jump in gross profit.

Reflecting on the quarter, Hult expressed pride in the team’s ability to achieve sequential improvements in key metrics amid inventory normalization, brand-specific challenges, and the hurricane’s disruption. He commended the strength of customer pay services, which represented the most profitable segment of the parts and service operation. Asbury also reduced SG&A costs sequentially and repurchased nearly 400,000 shares, aligning with its capital allocation strategy.

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