Net income slipped for Asbury Automotive Group Inc. in the second quarter as the retailer faced the brunt of the coronavirus' impact on operations even as the public dealership group benefited from higher gross profits on new- and used-vehicle sales.
Asbury on Tuesday reported second-quarter net income of $49.6 million, down 9.7 percent from the year-ago quarter. After adjustments for special items, earnings rose 6.1 percent to $48.7 million. The adjustments were for a $1.2 million gain from a legal settlement in 2020's second quarter and a $12 million gain on dealership and real estate divestitures in 2019's second quarter. Asbury said the legal dispute was related to the Takata airbag crisis.
Revenue for the Duluth, Ga., retailer fell 20 percent during the quarter to $1.45 billion.
Asbury shares fell 4.8 percent to close at $103.54 on Tuesday in New York.
The quarter also marked the revival of Asbury's efforts to buy most of Park Place Dealerships in Texas after a previous deal fell apart in the early days of the pandemic.
"Our focus on gross profit combined with our cost restructuring efforts allowed us to remain pro-active and committed to long term growth by moving forward with acquiring 12 Park Place luxury franchises in the Dallas Fort Worth Market under more favorable terms than the prior agreement," Asbury CEO David Hult said in a statement.
The Park Place acquisition is expected to close in late August, Hult said.
Asbury said Tuesday that though new-vehicle sales dropped 24 percent in the quarter, gross profit per new vehicle sold rose 33 percent to nearly $2,000. Twenty percent of Asbury's used-vehicle sales in the quarter went through the company's online sales tool — a record level. Hult said on a Tuesday call with analysts that further digital retailing developments will be coming in the fall.
"Not reserving a car, not holding a car, not processing a piece of the deal — we're very focused on the complete transaction," Hult said. "We have more tools that we're looking forward to launching in the second half of this year that we hope will get us to a higher plateau."
Asbury re-engaged with Texas luxury group Park Place Dealerships in the second quarter, announcing a deal earlier this month to acquire a majority of the group and its branding for $735 million. Asbury had terminated its initial deal, a planned $1 billion acquisition of most Park Place stores, in March, only days before it was slated to close, because of virus-related uncertainty and financing challenges.
The latest deal includes eight stores, two collision centers and an auction site. No longer included in the deal: real estate; a vehicle subscription service; a Jaguar-Land Rover store in Austin, Texas; and the Premier Collection, which includes the group's Bentley, Rolls-Royce, McLaren, Maserati and Koenigsegg outlets in Dallas.
Asbury on July 21 reinstated executive compensation to pre-virus levels, the company said in a separate filing Monday evening. On April 3, Asbury cut Hult's salary by 50 percent and reduced base salaries for senior vice presidents, regional and field vice presidents and national directors by 20 percent.
Asbury this spring furloughed 2,300 employees; half of those workers have since been brought back. Temporary pay cuts had been instituted for all employees, but full pay for all was restored on July 1, Asbury also said in Monday's filing.
Sales: Sales of new vehicles sank 24 percent to 20,060 vehicles in the quarter. Sales of used vehicles dropped 17 percent to 18,400 units.
Same-store sales: Sales of new vehicles on a same-store basis fell 23 percent to 18,984 units. That compared with a 33 percent drop in U.S. new light-vehicle sales across the industry in the second quarter, according to the Automotive News Data Center. Sales of used vehicles on a same-store basis fell 14 percent to 17,753.