Used vehicle sales shrank faster than new. How does the new strategy of ramping up volume help reconcile this?

Part of the used car decrease is due to fewer new car sales (less trade-ins). The biggest impact is the methodical shift to a higher volume strategy while maintaining healthy PVRs, avoiding aggressive inventory acquisition before September's valuation changes. Strategic acquisition of ~6,500 cars from auction and a healthy inventory (70% <30 days) are starting to show improvements, with volume expected to increase by Q4. “So the approach that we have taken is strategically acquiring inventory. We bought approximately 6,500 cars from auction last quarter. You can see the impact in our day supply from a 30 to 37 days supply.”

Can you share the SG&A to gross for seasoned Tekion stores (Koons, Florida) versus pre-Tekion? Also, is Q3 P&S growth expected to be at or above 4%, and is mid-single digit still the normalized long-term growth rate?

Specific SG&A numbers for individual stores are not available, but Koons (most seasoned) and other mature Tekion markets show significant efficiencies: Koons saw 14.2% increase in units per sales manager and 15.2% in units per F&I manager QoQ. SG&A percentage is expected to decline steadily each quarter to the low 60s by end of 2027. For P&S, July is similar to June's 4% growth, and low to mid-single digit growth is achievable in Q3. The company has not seen significant impact from labor rate peaking or consumer downshifting. “From a unit per sales manager, I'm just going to focus on Koons on a quarter-over-quarter increased 14.2% in productivity. Another number that I'll give you also is units per F&I manager again on a quarter-over-quarter sequential increase. this will be Koons increased in F&I 15.2%.”

How will the used vehicle procurement environment, especially with increased off-lease supply, impact volumes and GPUs in the back half?

The increase in off-lease returns is a benefit, allowing for enhanced inventory, faster turns, and better acquisition prices compared to auctions. This aligns with the strategy shift. While increased volume may impact margins, healthy PVRs will be maintained. The company has stress-tested scenarios, allowing for a $200-$250 drop per car for every additional 500 used cars sold. Electric vehicles coming off lease are also being retailed successfully. “As we start to get this lease turns to come in, it definitely gives us the ability to enhance the amount of inventory that we have turn it faster at a better acquisition price point than if we go to the auction. And that's one of the benefits of being a franchise dealer.”

ABG

Asbury Automotive Group (ABG) Q2 FY26 earnings call: guidance and Q&A

Q: What changed from Q1 to Q2, and how much of the 6% same-store new vehicle sales decline is Tekion-related versus market factors?

Q2 was a more 'normal' quarter without Q1 weather noise. New PVRs declined as expected. SG&A improved. Tekion has a temporary dip in sales for new stores due to adaptation, but recovery is faster than fixed ops. Other factors include Salento store inventory issues (down 28%) and a drop in some import volumes due to prior EV incentive rushes. “From a Tekion conversion, as I stated last quarter, we still -- we don't see the immediate impact that we see with customer pay. We're technicians on the muscle memory, but there is still an adaptation period for sales managers and salespeople on just the basic blocking and tackling of Internet lead follow-up et cetera.”

Q: Can you share the SG&A to gross for seasoned Tekion stores (Koons, Florida) versus pre-Tekion? Also, is Q3 P&S growth expected to be at or above 4%, and is mid-single digit still the normalized long-term growth rate?

Specific SG&A numbers for individual stores are not available, but Koons (most seasoned) and other mature Tekion markets show significant efficiencies: Koons saw 14.2% increase in units per sales manager and 15.2% in units per F&I manager QoQ. SG&A percentage is expected to decline steadily each quarter to the low 60s by end of 2027. For P&S, July is similar to June's 4% growth, and low to mid-single digit growth is achievable in Q3. The company has not seen significant impact from labor rate peaking or consumer downshifting. “From a unit per sales manager, I'm just going to focus on Koons on a quarter-over-quarter increased 14.2% in productivity. Another number that I'll give you also is units per F&I manager again on a quarter-over-quarter sequential increase. this will be Koons increased in F&I 15.2%.”

Q: How will the used vehicle procurement environment, especially with increased off-lease supply, impact volumes and GPUs in the back half?

The increase in off-lease returns is a benefit, allowing for enhanced inventory, faster turns, and better acquisition prices compared to auctions. This aligns with the strategy shift. While increased volume may impact margins, healthy PVRs will be maintained. The company has stress-tested scenarios, allowing for a $200-$250 drop per car for every additional 500 used cars sold. Electric vehicles coming off lease are also being retailed successfully. “As we start to get this lease turns to come in, it definitely gives us the ability to enhance the amount of inventory that we have turn it faster at a better acquisition price point than if we go to the auction. And that's one of the benefits of being a franchise dealer.”

Earnings call· Jun 2026 (Q2 FY26)· Consumer Discretionary· Jul 28, 2026

Source: earnings call transcript

Executive summary

Asbury Automotive Group Q2 FY26 — Tekion Rollout Progress and Strategic Capital Allocation

Asbury Automotive Group is navigating a transitional year, marked by the advanced rollout of its Tekion DMS across 70% of its stores, which is driving operational efficiencies in mature markets. The company is strategically shifting its used vehicle approach to prioritize volume while maintaining healthy PVRs and is actively deploying capital into share buybacks, temporarily increasing leverage. Management anticipates continued operational improvements and SG&A leverage as the Tekion implementation concludes.

Highlights

Tekion rollout reached 70% completion, with full implementation anticipated by October 2026.
Mature Tekion markets (Koons, Georgia, Florida) demonstrated significant operational improvements in June, including a 12% increase in average units per salesperson and a 10% increase in dollar per technician.
Used retail PVR saw a sequential increase of 5% to $1,927, indicating positive results from the new used vehicle strategy.
Adjusted SG&A as a percentage of gross profit improved to 66% on an all-store basis (260 bps better than Q1) and 65.3% on a same-store basis.
The company repurchased 7% of its 2025 ending share count in the first half of 2026, totaling $278 million.

Concerns

New units were down 6% on a same-store basis, influenced by Tekion adaptation, Salento store inventory, and import volume drops.
New PVRs were $3,896 on a same-store basis and $3,124 on an all-store basis, showing flattening sequential declines.
Customer pay business was flat year-over-year, and overall parts and service gross profit was slightly down due to the ongoing Tekion transition.
The noncash deferral headwind from Total Care Auto (TCA) negatively impacted adjusted EPS by $0.66 per share.
The transaction adjusted net leverage ratio stood at 3.4x at quarter-end, above the target of 3.0x, due to strategic share buybacks.

Guidance & targets

Category	Target	Timeline	Confidence
Tekion Rollout Completion	By October of this year high materiality	Q4 · FY26	High
Adjusted SG&A as a percentage of gross profit	Low 60% range high materiality	End of 2027 · FY27	Medium
Effective Tax Rate	Approximately 25% medium materiality	Remainder of the year · FY26	High
Capital Expenditures	Approximately $250 million medium materiality	Full year 2026 · FY26	High
Net Leverage Ratio	3.0x high materiality	Early to mid 2027 · FY27	Medium
Used Vehicle Volume	Increased volume medium materiality	Q4 · FY26	Medium
Fixed Operations Gross Profit Growth	Low to mid-single digit medium materiality	Q3 · FY26	Medium

ABG operating KPIs by quarter

ABG operating KPIs stated on its earnings calls, by fiscal quarter
KPI	Mar 2026 Q1 FY26	This call Jun 2026 Q2 FY26	Change vs prior quarter
F&I PVR	$2,307 Shifting to F&I We earned an F&I PVR of $2,307. Source: earnings call transcript	$2,214 Moving to F&I We earned an F&I PVR of $2,214, and finally, in the second quarter, our total front-end yield per vehicle was $4,698. Source: earnings call transcript	-4%

Operating figures the company stated on at least two of the calls shown, checked against each call's transcript. Click a figure to read the sentence. A dash means it was not stated that quarter.

Risks & headwinds

Frictional costs of Tekion rollout Ease over time as stores become more efficient; Q3 will be heavier lift than Q2

Not quantified, but described as 'frictional costs' and 'short term in nature'

Mitigation:Stores becoming more efficient with the technology over time.

Salento stores inventory mix impact Ongoing, takes time to replace old high-priced inventory

Salento stores down 28% over last quarter

Mitigation:Starting to see improvements on the inventory mix.

Impact of import volume drop

Pretty significant drop in volume for some imports

Mitigation:Some of it having to do with the rush that there was last year to buy some of the EVs due to the incentives going away.

Used car valuations decline September is right around the corner

Not quantified

Mitigation:Strategic and methodical approach to acquiring inventory, avoiding aggressive acquisition just to hit volume targets.

Margin compression in import OEMs

A little bit, slightly in some of the OEMs

Mitigation:Toyota still averaging 12 to 15 days supply, positioned for healthy margin.

Consumer pressure on service affordability

Not impactful in our service

Mitigation:Adjusting labor rates to provide good value, growing customer pay accounts and net retention.

What to watch in Q3 FY26

Tekion Rollout Completion

Q4 FY26

Current 70% complete

Target 100% by October 2026

Why it matters

Completion of the Tekion DMS rollout is expected to unlock significant operational efficiencies and drive SG&A leverage.

We anticipate completion of the rollout by October of this year.

Find out whether ABG delivers this. Inve re-checks your case every morning.

Q&A highlights

What changed from Q1 to Q2, and how much of the 6% same-store new vehicle sales decline is Tekion-related versus market factors?

Q2 was a more 'normal' quarter without Q1 weather noise. New PVRs declined as expected. SG&A improved. Tekion has a temporary dip in sales for new stores due to adaptation, but recovery is faster than fixed ops. Other factors include Salento store inventory issues (down 28%) and a drop in some import volumes due to prior EV incentive rushes.

“From a Tekion conversion, as I stated last quarter, we still -- we don't see the immediate impact that we see with customer pay. We're technicians on the muscle memory, but there is still an adaptation period for sales managers and salespeople on just the basic blocking and tackling of Internet lead follow-up et cetera.”

asked by Jeffrey Lick · answered by Dan Clara

2 min read 5 chapters

Detailed narrative

Tekion Rollout and Operational Efficiencies

Asbury has reached 70% completion of its Tekion DMS rollout, with full implementation expected by October 2026. This transition is a significant undertaking, but mature Tekion markets like Koons, Georgia, and Florida, with at least five months post-conversion, are already demonstrating improved productivity.

Specifically, these stores saw a 12% increase in average units per salesperson and a 10% increase in dollar per technician in June. The company anticipates these efficiencies will contribute to achieving an SG&A to gross profit ratio in the low 60% range by the end of 2027.

Used Vehicle Strategy Shift

The company is strategically shifting its used vehicle approach from solely maximizing gross profit to driving higher volume while maintaining healthy PVRs. This methodical approach involves strategic inventory acquisition, including approximately 6,500 cars from auction last quarter, which increased day supply from 30 to 37 days.

Management expects to see increased used vehicle volume by the fourth quarter of 2026, leveraging incoming off-lease vehicles and the benefits of being a franchise dealer for sourcing.

Capital Allocation and Share Buybacks

Asbury continues its balanced approach to capital allocation, deploying capital into share repurchases due to the attractive valuation of its stock. In the first half of 2026, the company repurchased 1.35 million shares for $278 million, representing 7% of its 2025 ending share count.

This strategic decision temporarily increased the transaction adjusted net leverage ratio to 3.4x, though the company aims to return to its 3.0x target by early to mid-2027.

Parts & Service Performance

The customer pay business was flat year-over-year, and overall parts and service gross profit was slightly down in Q2, primarily due to the ongoing Tekion transition and the adaptation period for new stores. However, the company observed better traction in June, with total same-store fixed gross profit up 4%.

Management expects a return to normalized growth levels in the coming quarters, with a low to mid-single-digit growth achievable in Q3, as more stores mature on the Tekion platform.

New Vehicle Performance and Mix

New units were down 6% on a same-store basis, with new PVRs at $3,896 (same-store) and $3,124 (all-store). The decline was attributed to the adaptation period for sales teams on Tekion, inventory mix issues at Salento stores (down 28% last quarter), and a drop in import volume, partly due to last year's rush for EV incentives.

Luxury volume was down 10%, imports flat, and domestic down 16% in Q2, with expectations for luxury to pick up in Q3/Q4.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.