Asbury Automotive Group (ABG) Q2 2025 Earnings Report

Asbury Automotive Group reported strong Q2 2025 results highlighted by resilient revenue and margin discipline despite a volatile tariff environment and ongoing portfolio optimization. The company posted revenue of $4.3732 billion, gross profit of $751.9 million (gross margin 17.19%), and adjusted operating margin of 5.8% with adjusted EPS of $7.43 for the quarter. GAAP EBITDA was $282.3 million, while adjusted EBITDA stood at $256 million, reflecting ongoing investments in Tekion and the Koons/DMS migration. Management underscored the importance of portfolio optimization, divesting 9 stores (annualized revenue $619 million) to reduce leverage while financing Herb Chambers’ acquisition completed in July 2025. Net leverage stood at 2.46x at quarter-end, with liquidity of $1.1 billion, and the company expects to further reduce leverage over the next 12-18 months. Free cash flow of $275 million through the first half of 2025 and a cash flow from operations of $91.4 million demonstrate solid cash generation even as capex runs around $250 million for 2025-2026. Management signaled mid-60% SG&A as a percent of gross profit in 2025, acknowledging Tekion implementation costs, and reiterated long-term cost discipline through fixed ops and fixed-cost optimization. The outlook remains nuanced: near-term EPS headwinds from tariff deferrals (TCA) and macro SAAR dynamics, balanced against a structurally improving parts and service business, a growing high-margin fixed operations franchise, and a transition to Tekion expected to yield SG&A efficiencies in 2027. The acquisition of Herb Chambers provides a defensible New England footprint with a strong luxury mix, while remaining disciplined on growth, diversification, and capital allocation.