Asbury Auto says vehicle sales slowed sharply in October


By Mridhula Raghavan

Oct 22 (Reuters) - U.S. auto dealer Asbury Automotive GroupInc said sales slowed "significantly" in October, afterdemand for used cars helped it report a better-than-expectedthird-quarter profit.

The company's shares fell as much as 9 percent.

Traffic at the company's stores and websites slowedsignificantly in the first two weeks of October, Chief ExecutiveCraig Monaghan told analysts in a conference call.

Asbury gets most of its revenue from the sale of luxury andforeign cars made by BMW, Mercedes-Benz, Honda andNissan, among others.

Monaghan said the slowdown could not be attributed entirelyto the U.S. government shutdown and that there has been somerecent improvement in business.

"I think the big question is - was (the fall in sales) theresult of the uncertainty in Washington?" Monaghan said. "Or arewe, as an industry, moving back to what we've seen historically,where there is a significant seasonality factor?"

Auto sales are typically much slower in the first and fourthquarters than in the second and third, he said.

Asbury's used-vehicle sales jumped 33 percent in the thirdquarter ended Sept. 30, while demand for luxury cars drove upnew-vehicle sales by 13 percent.

Like rival Sonic Automotive Inc, Asbury isconsidering setting up showrooms to sell only used cars.

"...In this lending environment, used cars are financed atvery favorable rates and terms," Chief Operating Officer MichaelKearney told Reuters. "(Used cars) will be a big part of ourstrategy process as we go forward."

Auto sales been boosted by increased bank lending tosubprime borrowers - those with poor credit profiles.

Lending to such borrowers dried up after the start of thecredit crisis in 2008.

U.S. banks made 36 percent of their car loans to subprimeborrowers in the second quarter, up from 34 percent a yearearlier, according to data released in September by Experian Plc, which tracks credit information and data on nearly 700million vehicles in North America.

Asbury earned 91 cents per share from continuing operationson an adjusted basis in the third quarter. Analysts had expected87 cents, according to Thomson Reuters I/B/E/S.

Revenue rose 17 percent to $1.39 billion, topping theaverage analyst estimate of $1.33 billion.

Net income rose to $22.7 million, or 73 cents per share,from $20.7 million, or 66 cents per share, a year earlier.

Asbury shares were down 4.5 percent at $51.76.

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