By Mridhula Raghavan
Oct 22 (Reuters) - U.S. auto dealer Asbury Automotive Group Inc said sales slowed “significantly” in October, after demand for used cars helped it report a better-than-expected third-quarter profit.
The company’s shares fell as much as 9 percent.
Traffic at the company’s stores and websites slowed significantly in the first two weeks of October, Chief Executive Craig Monaghan told analysts in a conference call.
Asbury gets most of its revenue from the sale of luxury and foreign cars made by BMW, Mercedes-Benz, Honda and Nissan, among others.
Monaghan said the slowdown could not be attributed entirely to the U.S. government shutdown and that there has been some recent improvement in business.
“I think the big question is - was (the fall in sales) the result of the uncertainty in Washington?” Monaghan said. “Or are we, 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 fourth quarters than in the second and third, he said.
Asbury’s used-vehicle sales jumped 33 percent in the third quarter ended Sept. 30, while demand for luxury cars drove up new-vehicle sales by 13 percent.
Like rival Sonic Automotive Inc, Asbury is considering setting up showrooms to sell only used cars.
“...In this lending environment, used cars are financed at very favorable rates and terms,” Chief Operating Officer Michael Kearney told Reuters. “(Used cars) will be a big part of our strategy process as we go forward.”
Auto sales been boosted by increased bank lending to subprime borrowers - those with poor credit profiles.
Lending to such borrowers dried up after the start of the credit crisis in 2008.
U.S. banks made 36 percent of their car loans to subprime borrowers in the second quarter, up from 34 percent a year earlier, according to data released in September by Experian Plc , which tracks credit information and data on nearly 700 million vehicles in North America.
Asbury earned 91 cents per share from continuing operations on an adjusted basis in the third quarter. Analysts had expected 87 cents, according to Thomson Reuters I/B/E/S.
Revenue rose 17 percent to $1.39 billion, topping the average 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.