Inventory, up 8.6%.
On the surface Asbury posted a steady quarter: $4.4 billion of revenue and gross margin essentially unchanged. That quiet top line is the headline many readers will take away.
But profit on the same revenue base slipped. Operating income fell 14.7% to $219.5 million and net income dropped 25% to $114.6 million, while diluted EPS fell nearly 20% to $6.25 even after the company reduced its diluted share count by 7.1% to 18.3 million.
What moved the needle was not sales or gross margin. It was a mix of higher operating costs and higher finance costs tied directly to acquisitions and inventory.
Asbury points to seller and integration costs and stepped-up interest as the culprits:
"Income from operations during the three months ended June 30, 2026 decreased by $37.9 million (15%) compared to the three months ended June 30, 2025, due to a $30.9 million (7%) increase in selling, general and administrative expenses, a $4.2 million increase in asset impairment expense, and a $4.0 million (21%) increase in depreciation and amortization expense, partially offset by a $1.2 million increase in gross profit."
10-Q 2026-07-31
This is the plain read: SG&A is up, depreciation and impairment moves hurt, and the small gross-profit uptick could not absorb those increases.
And the financing bill has a name attached.
"This increase was primarily due to a $7.0 million increase in our mortgage facilities interest expense and $2.5 million of credit facility interest expense as a result of borrowings incurred in connection with the Herb Chambers acquisition."
10-Q 2026-07-31
Asbury explicitly links roughly $9.5 million of higher interest to the Herb Chambers acquisition. Add another $3.5 million rise in floor‑plan interest for the quarter and the cost picture becomes clear: the buyout and the extra cars on lot are both carrying an interest charge.
Those extra cars show up in the balance sheet. Inventory grew faster than revenue and inventory intensity increased, which raises the working-capital and floor‑plan interest burden even while sales held flat.
There is a partial offset in other lines: the filing notes a big swing in gains from dealership divestitures in the prior period that helped other expense last year, so year-over-year comparisons are partly distorted by timing. But the concrete, recurring items in this quarter were higher SG&A, higher depreciation and amortization, and higher interest tied to the Herb Chambers borrowings and larger floor‑plan balances.
A small arithmetic wrinkle: diluted shares fell 7.1%, which cushioned the EPS decline a bit. Even so, net income and EPS both moved materially lower, so the reduction in share count was not enough to outrun the profit hit.
What matters now is whether the extra costs are temporary integration and working‑capital drag or the beginning of a steadier, higher-cost operating run. Asbury's filing shows which lines to watch next: the dollar change in mortgage and credit facility interest linked to Herb Chambers, floor‑plan interest levels, and the trend in SG&A and inventory intensity.
How quickly will the company cut the Herb Chambers–related interest and the higher selling costs so operating income can recover?
Figures and quotes from Asbury Automotive Group 10-Q filed July 31, 2026.