Asbury Automotive Group Inc. has cut $2 billion out of its revenue target and loosened the deadline for achieving the amount, the company said Thursday in reporting fourth-quarter earnings.
The publicly traded Asbury in 2022 announced it intended to reach $32 billion in revenue by the end of 2025, with responsibility for achieving that amount apportioned unequally among multiple strategies, including acquisitions and same-store sales.
On Thursday, Asbury revised that plan to say it would post at least $30 billion of annual revenue between 2025 and 2030.
CEO David Hult told Automotive News the more flexible goals announced Thursday are meant to avoid the company focusing on too specific a target to the point of detrimental business decision-making.
“We just thought [$32 billion] was too precise of a number, and ‘$30-plus’ seemed to make more sense,” Hult said.
A Thursday investor presentation from the national dealership group said interest rates, buy-sell prices and timing, used-vehicle inventory and the rebuilding of the industrywide new-vehicle sales rate also led Asbury to rework its goal.
Seaport Research Partners analyst Glenn Chin wrote in an investor note Thursday a reduced Asbury growth plan had been “widely expected.” The company also no longer mentioned a previously stated goal of $55 in earnings per share by 2025, he noted. Hult confirmed this excision was intentional.
“We just felt like it was too unpredictable to know in the future what our margins was going to be,” he said.
Focusing on revenue was a “more stable play,” he said.
Asbury’s new “$30-plus” billion target continues to be higher than the $20 billion 2025 goal Asbury had initially set in December 2020, when it was a $7.1 billion group and before in 2021 it bought companies collectively worth $5.8 billion in annualized revenue after divestitures, notably Larry H. Miller Dealerships.
Asbury posted 2023 revenue of $14.8 billion, down 4.1 percent from a year earlier. In December, it closed on Jim Koons Automotive Cos. — a group with more than $3 billion in annual revenue.
Hult told Automotive News Asbury’s original $20 billion figure for 2025 counted on a 17-million seasonally adjusted annualized rate of new-vehicle sales.
“We haven’t seen 17 million since before COVID,” Hult said. Cox Automotive estimated 2023 new-vehicles sales would hit about 15.1 million.
He also said Asbury believed it had done “a pretty good job” with acquisitions. But in considering the market, “we don’t think that we can go from $17 billion to $32 billion or $30 billion by ’25, and we didn’t want to feel the pressure or the rush to do that,” he said.
It was more important to maximize shareholder capital than reach the goal, he said.
“I don’t want it to go to an acquisition if share buybacks make more sense at a moment in time,” Hult said. “The plan today was to create flexibility, get off the stopwatch” of the December 2025 deadline.
“We are a growth-mode company; we just don’t want to be on a stopwatch to do it and make mistakes,” he said.
Shares in Asbury rose 4.9 percent to $216.96 in Friday afternoon trading.