Asbury Automotive (ABG) Q1 2023: Clicklane Sales Jump 93% as Omnichannel Drives New Customer Growth
Asbury Automotive’s Q1 underscored the company’s omnichannel momentum and margin discipline in a shifting auto retail environment. Clicklane, Asbury’s digital retail platform, delivered record growth and continues to expand its share of total sales, even as new and used vehicle volumes face supply-driven constraints. Management’s focus on profitability, operational efficiency, and strategic capital deployment positions Asbury to capitalize on industry normalization and future M&A opportunities.
Summary
- Omnichannel Acceleration: Clicklane’s rapid growth is reshaping Asbury’s customer acquisition and sales mix.
- Margin Management: Disciplined inventory and pricing strategies are sustaining profitability amid supply imbalances.
- Strategic Flexibility: Strong liquidity and measured capital allocation support future acquisitions and shareholder returns.
Business Overview
Asbury Automotive Group is a leading U.S. automotive retailer, generating revenue from new and used vehicle sales, finance and insurance (F&I), and high-margin parts and service operations. The company operates through a network of franchised dealerships and digital platforms like Clicklane, which offers an omnichannel, guest-centric car buying experience. Major revenue streams include new vehicle sales, used vehicle sales, F&I, and fixed operations (parts and service).
Performance Analysis
Asbury delivered resilient top-line results despite a softening in new and used vehicle volumes, driven by continued supply constraints and evolving consumer affordability dynamics. New vehicle revenue rose even as unit volume declined, reflecting higher average selling prices and selective inventory management. Gross profit per new vehicle moderated but remained structurally above pre-pandemic levels, as disciplined pricing and a focus on higher-margin models offset some volume headwinds.
Used vehicle revenue and gross profit per unit both declined year-over-year, as constrained inventory and higher interest rates pressured affordability and consumer demand. However, management prioritized margin over volume, sourcing nearly 70% of used inventory from trade-ins and off-lease vehicles rather than auctions, which helped preserve profitability. Parts and service operations stood out as a growth engine, with double-digit revenue and profit expansion, reflecting the aging vehicle fleet and increased retention initiatives.
- Digital Retail Surge: Clicklane vehicle sales soared 93% year-over-year, now representing 16% of total retail sales and driving $450 million in quarterly revenue.
- F&I Resilience: F&I per vehicle remained robust, with digital self-selection supporting high attachment rates even as overall PVR softened.
- Operational Efficiency: Production per employee increased, aided by software investments and workflow improvements, partially offsetting cost pressures.
Cash flow remained strong, supporting both opportunistic share repurchases and a patient M&A posture as the company evaluates strategic expansion opportunities.
Executive Commentary
"As expected, we are starting to see trends as the industry begins to normalize. We are strategically operating within a changing environment, and we continue to prioritize profitability."
David Holt, President and CEO
"With our robust cash flow generation, we have the flexibility to achieve our strategic goals and be able to seize opportunities. We constantly gauge the market for potential acquisitions that would further enhance our strong portfolio versus repurchasing shares to return capital to shareholders."
Michael Welch, CFO
Strategic Positioning
1. Omnichannel Retail Expansion
Clicklane, Asbury’s digital sales platform, is rapidly scaling, achieving record transaction growth and attracting a high percentage of new-to-Asbury customers (92%). The platform enables a seamless online-to-offline experience, with average delivery distances supporting retention in high-margin service departments. This digital channel is not only expanding reach but also driving higher F&I attachment rates due to customer-driven product selection.
2. Margin-First Inventory Management
Asbury is deliberately prioritizing gross profit over volume, particularly in used vehicles, by focusing on trade-ins and off-lease sourcing. This approach supports margin preservation in a tight inventory environment and reduces reliance on volatile auction channels. In new vehicles, pre-order rates remain elevated, though trending down, and pricing discipline is maintained on lower-supply models.
3. Fixed Operations as a Growth Anchor
Parts and service revenue and profit are growing double digits, underpinned by an aging car park and increased complexity of newer vehicles (including EVs). Asbury’s focus on technician recruitment and service cycle efficiency is designed to capture long-term retention and recurring revenue, providing a buffer against cyclical sales volatility.
4. Strategic Capital Deployment
With $1.7 billion in liquidity and low leverage, Asbury is positioned to pursue acquisitions that meet strict return and cultural criteria. The company is balancing this with ongoing share repurchases, maintaining flexibility as industry M&A activity remains robust but selective.
5. Insurance and Ancillary Product Expansion
The rollout of TCA (Total Care Auto, acquired with Larry Miller) continues, with phased integration expected to impact reported earnings in 2023 due to income deferral, but positioning Asbury for higher-margin, recurring revenue in future years as the program matures across major markets.
Key Considerations
This quarter highlights Asbury’s ability to adapt to evolving market conditions, leveraging digital innovation and operational discipline to sustain profitability and fund future growth. The strategy is increasingly centered on building a resilient, omnichannel retail model with high-margin service and ancillary offerings.
Key Considerations:
- Digital Retail Penetration: Clicklane’s rapid growth is attracting new customers and shifting the sales mix, but long-term profitability and retention will depend on continued customer experience enhancements.
- Inventory Normalization: Persistent supply imbalances, especially in key brands and models, are supporting elevated gross profits but may mask underlying demand elasticity as affordability pressures build.
- Parts and Service Leverage: The aging U.S. vehicle fleet and growing EV complexity are tailwinds for fixed operations, but technician availability remains a gating factor for further growth.
- Capital Allocation Discipline: Management’s willingness to pause on M&A and focus on high-return opportunities reflects a risk-aware approach in a volatile macro environment.
Risks
Asbury faces several risks, including further normalization of vehicle gross profits as supply and incentives return, potential consumer pullback from rising interest rates, and ongoing competition for skilled technicians in fixed operations. Digital channel growth may also introduce new competitive dynamics and margin pressures as adoption scales and competitors invest in similar capabilities.
Forward Outlook
For Q2 2023, Asbury signaled:
- Continued Clicklane expansion, aiming for $2.5 billion in full-year digital revenue
- Ongoing margin focus in both new and used vehicle segments, with selective volume recovery as inventory normalizes
For full-year 2023, management maintained its CapEx guidance of $200 million, with further TCA rollout and service expansion planned. Leadership expects the current margin structure to remain above pre-pandemic levels in the near term, with productivity initiatives and omnichannel investments providing incremental upside.
- Clicklane will remain a key growth lever, with digital F&I attachment and new customer acquisition monitored closely
- Acquisition opportunities will be evaluated against share repurchases as capital deployment priorities
Takeaways
Asbury’s Q1 demonstrates the power of digital innovation and operational discipline in navigating a complex auto retail landscape. Investors should monitor the pace of Clicklane adoption, margin normalization as supply returns, and the company’s ability to deploy capital into accretive growth opportunities.
- Omnichannel Shift: Digital sales are now a core growth engine, with Clicklane’s performance signaling a durable shift in customer behavior and acquisition strategy.
- Margin Durability: Current profitability is supported by disciplined inventory and pricing, but normalization risks remain as OEM incentives and supply patterns evolve.
- Strategic Optionality: A strong balance sheet and measured approach to M&A give Asbury flexibility to capitalize on market dislocations and technology-driven transformation.
Conclusion
Asbury Automotive is executing a disciplined, margin-focused strategy while aggressively scaling its digital retail platform. The company’s operational agility and strong balance sheet position it to weather industry normalization and pursue growth, but investors should remain attentive to evolving supply, demand, and digital competition dynamics.
Industry Read-Through
Asbury’s results reinforce several critical trends for the broader auto retail sector: The digital channel is becoming a structural growth driver, with omnichannel models increasingly necessary to attract new customers and capture F&I revenue. Persistent supply constraints are supporting elevated margins, but as inventory normalizes, retailers with strong fixed operations and customer retention will be best positioned. Parts and service remain a defensive moat, especially as the vehicle fleet ages and EV adoption grows. Capital allocation discipline and a focus on operational efficiency are emerging as key differentiators as macro and competitive risks intensify across the industry.