UPDATED: 4/23/14 12:19 pm ET -- adds details, background
Asbury Automotive Group Inc. said today it plans to open two stand-alone used-vehicle stores, making it the second publicly traded auto retailer to expand beyond new-car outlets this year.
In addition, the nation’s seventh-largest dealership group said COO Michael Kearney will retire next March.
The announcements came as Asbury released its first-quarter earnings. Asbury said net income slipped 3 percent to $31.4 million as revenues rose 11 percent to $1.36 billion.
Kearney, 62, will continue to work as COO until March 31. His retirement was announced now to give Asbury ample time to choose a replacement, the company said.
Asbury plans to open the two used-vehicle stores under the “Q auto” brand name. The first will open in June in Tampa, Fla., with the second expected in the autumn in Jacksonville, Fla.
Spending on stores
Asbury predicted each store will take 18 months to achieve profitability. Asbury expects the venture to require capital investment of up to $25 million. That is in addition to the $60 million in capital expenditures that Asbury previously estimated for 2014.
“Over the last three years, we have grown used-vehicle retail unit sales in excess of 55 percent and grown used-vehicle retail gross profit by close to 35 percent,” Asbury CEO Craig Monaghan said in a statement. “We remain excited about the opportunities we see in the used-vehicle market and believe there is an opportunity now for us to take our demonstrated used-vehicle retailing talent, technology and processes and expand into a stand-alone used-vehicle retailing model.”
Asbury said the launch of Q auto may reduce 2014 earnings by 8 to 12 cents on a per-share basis.
Asbury’s used-car venture follows similar plans unveiled by Sonic Automotive Inc. last October, and represents a challenge to the dominant player in the used-vehicle market, CarMax Inc.
Sonic, the nation’s fourth-largest retailer of new vehicles, plans to open its used-only stores in Denver in the fourth quarter.
Sonic hasn’t said how many such stores it eventually hopes to have, but Jeff Dyke, executive vice president of operations at Sonic, said in October, “One hundred is the tip of the iceberg.”
The used-vehicle operation will have its own dedicated management team, a separate national brand and a national footprint, Dyke said. It will specialize in vehicles up to 10 years old with an average price range of $14,000 to $18,000.
COO since 2009
Kearney has been Asbury COO since March 2009. Before that, he headed the retailer’s former Eastern region, which included stores in Georgia, North Carolina, South Carolina, Virginia, New Jersey and Florida. He has been with the company since it acquired Crown Automotive Co. in North Carolina in 1998. Kearney joined Crown as CFO in 1990.
“While I am looking forward to enjoying more time following personal pursuits, I am also excited for Asbury, as it is well-positioned for the future,” Kearney said in a statement. “I also want to thank all of Asbury’s associates for their dedication and support over the years.”