Asbury Automotive Group(ABG)2025-01-30 21:32Financial Data and Key Metrics Changes - The company generated a record revenue of 750 million, an increase of 11%, with a gross profit margin of 16.6% [16] - Adjusted earnings per share (EPS) was 254 million [29][16] - Same-store adjusted SG&A as a percentage of gross profit was 62%, with an all-store adjusted operating margin of 5.7% [16][30] Business Line Data and Key Metrics Changes - Same-store new vehicle volume increased by 7% year-over-year, with gross profit per new vehicle at 1,584 [11][21] - Parts and Service gross profit was up 11% on a same-store basis, with the Customer Pay segment growing by 13% [13][24] Market Data and Key Metrics Changes - The same-store new day supply was 47 days at the end of December, while used DSI was 37 days [20][21] - The company retailed approximately 12,000 sales through Clicklane in Q4, a 6% increase year-over-year [26] Company Strategy and Development Direction - The company is focused on cost discipline, with SG&A costs as a percentage of gross profit falling for the second consecutive quarter [14] - A pilot program with Tekion aims to improve efficiency and guest experience, with early feedback being positive [15][51] - The company anticipates inventory challenges to persist throughout 2025, impacting used vehicle pricing [12] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about 2025, citing a stable market and potential improvements from Stellantis [50][88] - The average age of cars serviced is increasing, indicating a strong demand for parts and service [49][87] - Management noted that January has been mixed due to weather impacts but remains optimistic about parts and service performance [58] Other Important Information - The company expects adjusted SG&A as a percentage of gross profit to be in the mid-60s for 2025 [30] - TCA generated $20 million of pre-tax income in Q4, with expectations for a deferral impact in 2025 [31][33] Q&A Session Summary Question: How much of the new GPU strength is due to seasonality versus market stabilization? - Management indicated that the new GPU strength is influenced by both seasonality and improvements in brand performance, particularly with luxury brands [40][44] Question: Can you elaborate on the efficiency improvements with Tekion? - Management highlighted a significant reduction in plug-on costs and improved onboarding efficiency, leading to better productivity [51][52] Question: What are the expectations for January sales momentum? - Management noted mixed results in January due to weather but observed an increase in parts and service sales compared to the previous year [56][58] Question: Can you unpack the SG&A improvements? - Management attributed the improvements to cost reductions and increased gross profit, with potential for further efficiency gains [64][66] Question: What is driving the higher TCA deferral headwinds for 2025 and 2026? - Management explained that the deferral headwinds are due to a combination of increased expectations for unit growth and the rollout of new platforms [70][72] Question: How does inventory growth impact GPU? - Management acknowledged that higher inventory levels typically lead to lower margins, emphasizing the need for balanced inventory management [81][82] Question: What are the key factors that could lead to variance in 2025 expectations? - Management pointed to strong demand, the average age of vehicles, and potential improvements from Stellantis as key factors [85][88] Question: How is the company preparing for potential tariff impacts? - Management indicated that discussions with OEMs are premature, but they remain optimistic about the overall market dynamics [138] Question: Has consumer sentiment regarding affordability changed post-election? - Management noted a positive sentiment shift post-election, although affordability remains a concern for many consumers [141][143]