Asbury: 3 Key Takeaways for Long-Term Investors
Software integration headwinds are fading, freeing management to focus on store productivity and debt reduction.
Asbury Motors' third-quarter 2026 earnings call highlighted significant strides in operational efficiency and financial strategy. The company successfully completed the conversion of all dealerships to a single software system, Tekion, which is expected to reduce operational drag and boost productivity gains in store results. Long-term investors should take note of this shift as productivity typically declines during a six-month learning period for new software, but Asbury's long-standing stores are already showing higher service profits.
Management has redirected its focus towards expanding used car volume while maintaining margins, with used retail volume increasing by 4.5% from the previous quarter. The disciplined store appraisal processes have supported this momentum in the used vehicle business. Daniel Clara, Asbury's President and CEO, noted that the company is now directing cash flow towards paying down debt rather than engaging in stock buybacks or dealership acquisitions.
Asbury closed the quarter with a net leverage ratio of 3.5 times operating earnings, aiming to lower this ratio before repurchasing shares by mid-2027.
Looking ahead, operational focus is shifting back to core dealership execution as software integration challenges fade away. Management anticipates that selling, general, and administrative expenses as a percentage of gross profit will reach the low-60% range by late 2027, as productivity gains from the new system roll out. With the conversion completed, the resources previously dedicated to implementation can be redirected back into running and growing the business.
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