Asbury Automotive Group's net income ticked up slightly in the third quarter, despite slipping new-vehicle sales and profits. Growth in income from finance and insurance and service and parts compensated for the drop in new vehicles, which was attributed to a cutback in automaker incentive money.
Asbury reported Tuesday that net income for the quarter rose 1.6 percent to $45 million. Third-quarter revenue rose 4.8 percent to $1.84 billion. Gross profits on both new and used vehicles tumbled during the quarter for the Duluth, Ga., retailer, but overall gross profit rose 5.4 percent to $293.1 million.
Asbury's performance this quarter was significantly hurt by incentive changes at a single midline import brand, company CFO Sean Goodman said. Goodman said the hit to earnings amounted to 14 cents on a per-share basis. The retailer reported net income of $2.36 per share for the quarter. Asbury declined to name the brand.
The numbers didn't please Wall Street. Asbury shares fell 8.8 percent to close the day at $96.66.
The biggest import-brand contributors to Asbury's new-vehicle revenue are Honda with 19 percent, Toyota with 13 percent and Nissan with 9 percent.
CEO David Hult said that Asbury qualified for all of the incentive money possible from the unnamed brand, but the amount available was 30 percent lower than for the prior-year's quarter. He said the retailer was notified of the change right after the third quarter began. The incentives in question were stair-step target incentives tied mainly to volume but in part to customer satisfaction scores, an Asbury spokeswoman confirmed.
Meanwhile, Asbury acquired two dealerships during the quarter: a Toyota store in Indianapolis; and the retailer's first-ever Subaru store, Mike Shaw Subaru, in Thornton, Colo. Both stores are expected to generate $175 million in combined annual revenue.
The Subaru purchase marks Asbury's entry in the Denver market.
"We have long been attracted to this market, due to its business-friendly environment, moderate cost of doing business and growing population in attractive demographics," Hult said on a conference call with analysts. "In Mike Shaw Subaru, we have found the ideal anchor store. We plan to build our presence in the market, following a similar approach to what we successfully executed in Indianapolis."
Asbury has steadily expanded in the Indianapolis market since acquiring a Chevrolet store there in 2017.
Sales: New-vehicle sales fell 2.4 percent to 27,078 vehicles. Used-vehicle retail sales rose 10 percent to 22,998 vehicles.
Same-store sales: New-vehicle sales fell 4.9percent to 25,986 vehicles. That was worse than the industry performance; total U.S. light-vehicle sales in the third quarter were flat, according to the Automotive News Data Center. Same-store used-vehicle sales increased 6.3 percent to 21,810 vehicles.
Asbury ranks No. 7 on Automotive News' list of the top 150 dealership groups based in the U.S., with retail sales of 105,275 new vehicles in 2018.