Overview of Financial Performance

Asbury Automotive Group, Inc. is a leading automotive retailer in the United States, operating 33 dealerships and 52 franchises across the country. In 2024, the company reported strong financial results, with consolidated revenue increasing 16% to $17.19 billion and consolidated gross profit increasing 7% to $2.95 billion compared to the prior year.

The increase in revenue and gross profit was primarily driven by the acquisition of the Jim Koons Dealerships in late 2023, as well as growth in the parts and service business. However, the company faced several headwinds during the year, including the impact of Hurricanes Helene and Milton, stop sale orders for certain Toyota, Lexus and BMW models, and a cyber-incident that disrupted operations.

Revenue and Profit Trends

Asbury’s new vehicle revenue increased 16% in 2024, with a 4% increase in new vehicle unit sales. Same-store new vehicle revenue was flat, as a 4% increase in revenue per vehicle sold was offset by a 1% decline in unit volumes. New vehicle gross profit declined 9% due to a 21% decrease in gross profit per vehicle, partially offset by the increase in unit sales.

In the used vehicle segment, revenue increased 18%, driven by an 18% increase in used retail unit sales. However, same-store used vehicle revenue declined 3%, as a 5% decrease in used retail unit sales more than offset a 19% increase in used wholesale revenue. Used vehicle gross profit decreased 7%, with retail gross profit margins contracting 122 basis points to 5.0%.

The parts and service business was a bright spot, with revenue increasing 13% and gross profit rising 17%. Same-store parts and service revenue grew 2%, with customer pay and warranty revenue offsetting a decline in wholesale parts. The company continues to focus on growing its high-margin parts and service operations.

Finance and insurance (F&I) revenue and gross profit increased 13% and 11%, respectively, primarily due to the 17% increase in new and used retail unit sales. However, on a same-store basis, F&I revenue and gross profit declined 5% and 8%, respectively, due to a 6% decrease in F&I revenue per vehicle retailed.

Strengths and Weaknesses

A key strength of Asbury’s business model is its diversified revenue streams, with new vehicles, used vehicles, parts and service, and F&I all contributing meaningfully to the top and bottom lines. This diversification helps to mitigate the impact of volatility in any one business segment.

The company’s focus on growing its high-margin parts and service operations is also a strength, as this segment provides a stable source of recurring revenue and profitability. Asbury’s investments in training, equipment, and the customer experience in this area have paid off with strong same-store performance.

However, Asbury faces ongoing challenges in the new and used vehicle markets. The company has been impacted by supply chain disruptions, inventory constraints, and affordability headwinds that have pressured margins in these segments. The stop sale orders for certain models and the cyber-incident further exacerbated these challenges in 2024.

Another potential weakness is Asbury’s reliance on acquisitions to drive growth. While the Koons acquisition contributed significantly to the company’s 2024 results, integration risks and the ability to find suitable acquisition targets at attractive valuations could pose challenges going forward.

Outlook and Future Prospects

Looking ahead, Asbury’s management remains cautiously optimistic about the company’s prospects. The pending acquisition of the Herb Chambers Dealerships, which is expected to close in the second quarter of 2025, will further expand Asbury’s footprint and diversify its brand mix.

The company also expects to continue investing in its parts and service operations, as well as in technology and digital initiatives to enhance the customer experience and improve operational efficiency. However, the automotive retail industry is likely to remain subject to supply chain disruptions and inventory constraints in the near term, which could continue to impact new and used vehicle sales and margins.

Asbury’s strong liquidity position, with $827.7 million in total available liquidity as of December 31, 2024, provides the company with the financial flexibility to navigate these challenges and pursue strategic growth opportunities. The company’s disciplined capital allocation strategy, including share repurchases and selective acquisitions, also supports long-term shareholder value creation.

Overall, Asbury Automotive Group appears to be a well-diversified and financially sound automotive retailer, but it faces ongoing industry-wide headwinds that could pressure its performance in the short to medium term. The company’s ability to successfully integrate acquisitions, grow its high-margin parts and service business, and adapt to changing market conditions will be key to its long-term success.