DULUTH, Ga. -

During Tuesday’s quarterly earnings conference call, an analyst asked Asbury Automotive Group management about what led to such a strong uptick in the gross profit for the reconditioning/preparation part of the company’s parts and service business, given the more modest increase in used retail sales.

In answering, Asbury’s Michael Kearney turned to the 121 Program, the group’s used retail program that aims for a one-to-one used-to-new sales ratio.  (During the third quarter, the used-to-new sales ratio was 72 percent).

“Part of that philosophy and program is a broadening of the type of cars that we inventory for the used side and a broadening of the price band,” said Kearney, Asbury’s executive vice president and chief operating officer, regarding the 121 Program. “Going along with that, in a number of cases, can be an increase in the amount of reconditioning work that we do on those cars to bring them up to our standards.

“Part our tire initiative, one of our internal parts of the tire initiative, is to expand the availability of tires internally. There’s been a very big push on that,” he continued

Specifically, there was $17.2 million in same-store gross profits from reconditioning/preparation, up 17 percent year-over-year.  The analyst had also asked whether the aforementioned growth in recon and prep is something that can be continued.

On that, Kearney had this to say: “We’ve seen substantial increases. I’m not sure we can maintain the level of growth with the level of used-car growth, but as we continue to push more used-car growth in the ensuing quarters, I think you can expect that the reconditioning and internal business will remain very strong for us.”

Interestingly enough, Kearney addressed this topic during Asbury’s second-quarter call, forecasting some of the growth in this sector that the retailer would end up seeing this past quarter.

“As we continue to reach to the 100-percent level (of the 121 Program), we will continue to grow that internal parts and service business, as we just get more and more cars available,” Kearney said in July. “I think near-term, we’ll continue to see strong growth in that arena as long as we continue to push our used-car program.”