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Asbury: ‘Favorable Lending Environment” Spurs 9% Gain in Q4 F&I Revenue

February 11, 2016

DULUTH, Ga. — A “favorable lending environment” in the fourth quarter delivered a 9% year-over-year increase in same-store F&I revenues and a $55 increase in Asbury Automotive Group’s per-copy average.

The dealer group’s fourth-quarter F&I revenues totaled $60.7 million on a same-store basis, while the group’s F&I profit per vehicle retailed (PVR) increased 4% from the year-ago quarter to $1,426. The latter helped the group offset declines of 9% and 6% in new- and used-vehicle gross profit per unit sold, respectively.

“… We’ve been able to generate incremental F&I PVR to offset some of the long-term pressure that we’ve seen on both new and used margins,” said Craig T. Monaghan, president of Asbury. “And it’s roughly $3,000 a car. That seems to be the number the industry depends on in order to generate the returns it needs on the capital that’s tied up in these car stores. And I would expect, as an industry, that’s the kind of a number that we’ll continue to see as we go forward.”

Combined with F&I, front-end gross profit for both new and used fell 3% to $3,222 in the fourth quarter.

Asbury’s fourth-quarter revenues on a consolidated basis rose 9% to $1.64 million, while net income jumped from $11.8 million in the prior-year period to $41.1 million.

Parts and services also performed well during the fourth quarter, with both revenue and gross profit growing 7% to $175.8 and $108.8 million, respectively. Overall, Asbury’s same-store revenue and gross profit increased by 7% and 4%, respectively, on a year-over-year basis.

Also in the fourth quarter, Asbury Automotive’s standalone Q Auto Stores, which employ a one-touch sales and F&I processes, continued to underperform in the fourth quarter.

“It had been losing somewhere in that $0.01 to $0.02 (per-share) range, so we’re kind of where we thought we’d be,” Monaghan noted. “I would say it continues to be something that we feel very good about. It is a laboratory and we shouldn’t kid ourselves; we continue to learn.”

Monaghan added that the group has begun altering how it markets its Q Auto stores, such as co-branding one of the stores with a local regional name. And although the Q Auto Stores have yet to generate an attractive return, officials said their optimistic about 2016.

“I think we need some more time,” Monaghan said. “I think this is the year for Q … Our internal objective is to get it to the point where those stores are generating attractive ROI.

“Our larger format store is actually the store that’s giving us the most challenge,” he added. “But we think there’s still an opportunity there and it’s something we’re going to continue to pursue.”

For the full year, Asbury reported adjusted income from continuing operations of $147 million, up from $131.5 million in 2014. Net income was $169.2 million, up from $111.6 million in the prior-year period.

The group posted total revenue for all of 2015 of $6.59 billion on a consolidated basis, with total new-vehicle revenue increasing 13% to $3.65 billion on sales of 105.981 units sold. Total used-vehicle revenues grew 11% from 2014 to 1.93 billion. For the year, Asbury sold 82,589 used units.

On a same-store basis, average gross profit per new-vehicle sold fell 7% to $1,935, while gross profit per used-vehicle sold fell 4% to $1,676.

Full-year F&I revenues on a same-store basis increased by $18.5 million from the prior-year period to $237.8 million, while the group’s F&I per-copy average increased by $43 from the prior-year period to $1,387.

“Despite all the achievements, there’s growing concern across the industry regarding margins on new and used vehicles,” Monaghan said. “As a company, we began to experience margin erosion early in 2015. As the year progressed, this pressure continued and had a material impact on our fourth-quarter results.

“As always, we will continue to seek opportunities to become a stronger and more efficient company,” he added. “We will continue to focus on growth opportunities in used vehicles, F&I and parts and service.”

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