Tech investments paying off for Asbury as Q2 profit climbs 49%
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ATLANTA -- The efficiencies of a common dealership management system are starting to roll through to the bottom line for Asbury Automotive Group Inc.
Expense reduction, in large part connected to Asbury's investment in a common DMS and related technology, contributed to a 49-percent spike in the retailer's second-quarter net income.
Second-quarter earnings rose to $21.1 million from $14.2 million a year earlier, the retailer said in a statement today. Revenue increased 11 percent to $1.2 billion.
Asbury, based in suburban Atlanta, said new-vehicle sales were up 16 percent and used-vehicle sales rose 7 percent during the second quarter.
The company said retail margins "continue to be under pressure." Gross profit per vehicle fell 10 percent on new vehicles and 13 percent on used vehicles.
Asbury, the nation's seventh-largest dealership group, finished its conversion to a common DMS for its 79 stores in January. While the change is paying off already -- 70 cents of every incremental dollar of gross profit dropped to the bottom line in the second quarter -- Asbury stands to gain additional benefits, CEO Craig Monaghan told Automotive News today.
Asbury has converted all its stores to ADP Dealer Services, he said.
"We're far from being power users on these new systems," Monaghan said. "They're great systems. They're capable of running at 100 mph. We're still running at 60. We've got a little ways to go."
Getting smarter
The common system "makes us smarter," Monaghan said, recalling a recent visit with a store general manager. The general manager was using the system to compare his results to same-brand stores in other markets and identify areas where he could improve his store's results.
The technology automates certain dealership operations and has enabled the same number of people to produce more, Asbury CFO Scott Krenz said. For instance, moving a vehicle between stores is now recorded automatically and no longer requires extra effort from people at each store to record the transaction.
Krenz said Asbury's gross profit rose $10 million during the quarter, but selling, general and administrative expenses rose by just $2 million. The company's operating leverage -- expenses as a percentage of gross profit -- improved by 2.5 percentage points.
Other contributors to Asbury's second-quarter profits included record finance-and-insurance results, where revenue jumped 21 percent.
Higher volumes
And though profit margins for new vehicles dipped, higher volumes led to higher new-vehicle gross profit. Though used-vehicle volume rose, Asbury's used-car margin and gross profits dropped.
Gross profit on parts and service rose 4 percent.
Asbury ranks No. 7 on the Automotive News list of the top 125 dealership groups in the United States with sales of 68,770 new vehicles in 2011.
Reuters contributed to this report.
You can reach Amy Wilson at awilson@crain.com.
