Asbury Automotive Group Inc (ABG) Q4 2020 Earnings Call Transcript

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Asbury Automotive Group Inc (ABG 2.00%)
Q4 2020 Earnings Call
Feb 2, 2021, 10:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day, ladies and gentlemen, and welcome to the Asbury Automotive Group Q4 2020 Earnings Call. [Operator Instructions] And at this time, I'd like to turn the conference over to Matt Pettoni. Please go ahead.

Matt Pettoni -- Vice President of Finance and Treasurer

Thanks, operator and good morning, everyone. Welcome to Asbury Automotive Group's fourth quarter 2020 earnings call. Today's call is being recorded and will be available for replay later today. The press release detailing Asbury's fourth quarter results were issued earlier this morning and is posted on our website at asburyauto.com.

Participating with me today are David Hult, our President and Chief Executive Officer; P.J. Guido, our Chief Financial Officer; and Dan Clara, our Senior Vice President of Operations. At the conclusion of our remarks, we will open the call up for questions and I will be available later for any follow-up questions you might have.

Before we begin, I must remind you that the discussion during the call today is likely to contain forward-looking statements. Forward-looking statements are statements other than those which are historical in nature, including those statements relating to the duration and contemplated impact of the COVID-19 pandemic on our business and financial performance as well as the financial projections and expectations about our products, markets and growth.

All forward-looking statements are subject to significant uncertainties, and actual results may differ materially from those suggested by the statements, including potential impacts from the COVID-19 pandemic on us, our industry and our customers, suppliers, vendors and business partners. For information regarding certain of the risks that may cause actual results to differ please see our filings with the SEC from time to time, including our Form 10-K for the year ended December 2019, any subsequently filed quarterly reports on Form 10-Q and our earnings release issued earlier today. We expressly disclaim any responsibility to update forward-looking statements. In addition, certain non-GAAP financial measures as defined under SEC rules may be discussed on this call. As required by applicable SEC rules, we provide reconciliations of any such non-GAAP financial measures to the most directly comparable GAAP measures on our website.

It is my pleasure to hand the call over to our CEO, David Hult. David?

David W. Hult -- President and Chief Executive Officer

Thanks, Matt. Good morning, everyone. Welcome to our fourth quarter earnings call. We just reported another all-time record fourth quarter despite continued volatility and uncertainty in the economy. As SAAR recovered from Q2 lows, we delivered a strong gross margin of 16.7%, which expanded 80 basis points versus Q4 of last year. We also remain very active in managing expenses and we achieved SG&A as a percentage of gross profit of 61.4%. Our focus on gross profit and expense management once again produced a great quarter. With adjusted EPS of $4.44, up 76% over the prior year.

I would also like to call out that 2020 as a whole was a record year for Asbury. For the full year, we grew adjusted EPS by 36%. Increased adjusted income from operations by over $70 million to $405 million, an increase of 21% and the highest level ever. We acquired a Chrysler Jeep Dodge store in Denver from John Elway. We acquired eight Park Place's dealerships, two collision centers and one auction center in Dallas, which in total added $1.9 billion in annualized revenue. We launched Clicklane, our communication technology and ecosystem, which allows for a true online car buying and selling transaction. We publicly announced our five-year strategic plan, which targets growing the company to $20 billion in revenue by 2025.

Our balance sheet remains strong due to our performance in cash flow. Our pro forma net leverage ended this quarter at 2.1 times. This will allow us to maintain a more active acquisition pipeline and grow our business strategically by deploying capital. Looking back over the last three years. We have dramatically transformed our portfolio by acquiring $2.5 billion and divesting $700 million in annualized revenue. Our acquisitions had much higher margins than our divestitures and were accretive to our overall margin. This helped us achieve our 5.7% operating margin compared to 4.6% in 2018. We will continue to optimize our portfolio in the future.

Turning to our key objectives in 2021. We will continue to build a strong culture obsessed with the guest experience. Rollout our Clicklane platform to all stores by the end of Q1, be great partners to our OEMs by delivering an exceptional and transparent guest experience. Grow our same-store revenue across all departments, build our M&A pipeline to support our goal of acquiring $5 billion of revenue by 2025 and maintain net leverage at or below 3 times, while executing a more active capital allocation strategy.

Finally, we know the only differentiator we have in our franchise system is the level of service we offer. Our strong performance is because of all the men and women in our stores who'd show up every day committed to serving our guests with passion and professionalism. Their incredible performance inspires all of us to be better today than we were yesterday. Our future is bright and we look forward to sharing this journey with all of our teammates, who run our business every day. We are thankful they are here making a meaningful difference.

I will now hand the call over to Dan to discuss our operating performance, Dan?

Dan Clara -- Senior Vice President of Operations

Thank you, David and good morning, everyone. My remarks will pertain to our same-store performance compared to the fourth quarter of 2019. Looking at new vehicles. Based on current market conditions, our focus remains on improving margins and not chasing volume. Our new gross profit per vehicle was up $779 per car or 49% from the prior year period. All segment margins were up significantly from the prior year period. Factoring in the acquisition of Park Place, we increased our luxury mix to 48%, driving our all store PVRs up $1,282 a car or 79%. At the end of December, our total new vehicle inventory was $640 million and our day supply was 40 days, down 26 days from the prior year. As a reminder, 40 days is an average composite of all of our brands. Some of our brands were below 20 day supply during the quarter and experienced major challenges due to the lack of inventory. We expect that day supply to remain low for the first half of the year, but gradually recover for the back half as production capacity recovers.

Turning to used vehicles. Our gross profit margin was 7.1%, up 60 basis points from the prior period, representing our gross profit per vehicle of $1,741. Similar to our new vehicle strategy in the current market condition, we focused on being opportunistic with our inventory and improving growth to maximize profits. As a result of our performance, our used retail gross profit was up 10%. Our used vehicle inventory ended December at $189 million, which represents a 31 day supply, up two days from the prior year.

Turning to F&I. Our strong consistent and sustainable growth in F&I delivered an increase of $126 to $1,817 per vehicle retail from the prior year quarter. In the fourth quarter, our front-end yield per vehicle increased $701 per car to a fourth quarter record of $3,924. In addition, if you include reconditioning gross profit, which we report in parts and service, our front-end yield per vehicle was $4,582 per car. Turning to parts and service. Although our parts and service revenue decreased in the quarter, our business improved from the lows in April, but the recovery continues to be choppy due to the pandemic.

And now, I would like to provide an update on our omnichannel initiatives. In December, we launched Clicklane, which is the latest evolution in our omnichannel strategy that we began more than five years ago. Clicklane is a communications technology ecosystem, which allows for a true online car buying and selling experience. It feels many other guests that exist with online automotive retail platforms currently on the market. Features that are unique to this platform includes, penny perfect trading values and loan payoffs, real payment figures based on local taxes and fees, a loan marketplace, which now includes more than 30 lenders, VIN-specific finance and insurance products customized to the vehicle and consumer, the ability to sign all documents online via DocuSign, the in-tool service and collision appointment scheduled scheduler. Early results and guest feedback on our Clicklane platform have been extremely encouraging.

We piloted Clicklane in three stores for the full month of December and the results have exceeded expectations. These three stores double their online car sales versus the prior year period. In addition, customers have commented on the great transparency, ease of use and ability to complete a transaction in minutes. The average timing to the guest to complete a total online transaction, including arranging the financing was 14 minutes and it took only 8 minutes for an entire transaction without financing or an all-cash deal. Since the end of Q4, we've continued with our rollout of Clicklane and expect to have all the stores rolled out by the end of Q1. With the majority of stores connected during the second half of Q1.

And finally, looking at the results from our first full quarter of Park Place, reconfirms why we made the acquisition. The first full quarter contributed meaningfully to our top line and profitability results. And we are well on track to deliver the synergies we have targeted within the timeframe previously outlined. I would like to take this opportunity to express appreciation to all of our teammates in the field for their continued focus on the guest experience, their commitment to continuous improvement and their perseverance during 2020.

I will now hand the call over to P.J. to discuss our financial performance. P.J.?

Patrick J. Guido -- Senior Vice President and Chief Financial Officer

Thank you, Dan and good morning, everyone. I would like to provide some financial highlights, which marks another record quarter for our company in this still uncertain macro environment. For additional details on our financial performance for the quarter, I would refer you to our financial supplement in our press release dated today February 2. Overall compared to the fourth quarter of last year, total revenue was 18% higher than last year due to completed acquisitions and improvement in F&I, PVRs and higher average selling prices for both new and used. Gross margin expanded by 80 basis points to 16.7% driven by our proactive inventory management and focus on improving gross profit per unit.

Moving down the P&L. We saw SG&A as a percent of gross profit decreased by 690 basis points to 61.4%. This is due to proactive expense reductions and efficiencies gained on personnel and advertising. Our actions to maximize gross profit and control expenses resulted in a record fourth quarter adjusted operating margin of 6%, an increase of 140 basis points about the same period last year. Adjusted EPS increased by 76% versus the prior period, maintaining momentum from the previous quarter. Net income for the fourth quarter 2020 was adjusted for a $3.9 million or $0.15 per diluted share pre-tax gain on a dealership divestiture.

Net income for the fourth quarter of 2019 was adjusted for a $7.1 million pre-tax charge for franchise rights imperatives or $0.27 per diluted share. A $6 million -- $600,000 pre-tax charge for real estate related charges or $0.03 per diluted share and a $600,000 pre-tax gain from a legal settlement or $0.03 per diluted share. Our effective tax rate was 24.8% for the full year 2020 compared to 24.4% in 2019. Floor plan Interest expense for the quarter decreased by $4.6 million over the prior year quarter, driven primarily by lower inventory levels and lower LIBOR rates. With respect to capital deployed this quarter, we spent approximately $20 million on store improvements and real estate and we spent approximately $80 million on debt repayment, which includes fully paying off our used line. Also during the quarter, we divested a Ford dealership in Georgia, which generated approximately $50 million in annualized revenues. As a result of our operational performance, our balance sheet remains in a very strong position and we ended the quarter with approximately $462 million of liquidity comprised of cash, floor plan offset accounts, availability and availability on both our used line and revolving credit facility. Also at the end of the quarter, our pro forma net leverage stood at 2.1 times, well below our targeted leverage range of 3.0 times.

I would now like to make a few comments regarding our expectations for 2021. We are still operating in a volatile environment with limited visibility, but do anticipate a gradual recovery in the second half of 2021 as COVID vaccines get rolled out and OEM production capacity improves. As a result, we are planning our business for a SAAR approximating 16 million units. But we'll remain nimble and vigilant to adapt to whatever conditions evolve. And inventories begin to normalize and the economy opens up, we believe our parts and service gross profit see the full recovery. We also believe that SG&A as a percentage of gross profit should continue to benefit from active expense management and improved productivity. We are also planning for a tax rate in 2021 of approximately 25% and capex of approximately $55 million. This amount excludes real estate purchases and potential lease buyout opportunities that we consider to be financing transactions.

Finally, I would like to also provide a quick review of our five-year plan we unveiled at our launch of Clicklane in December. Our five-year strategic plan is to add $12 billion of revenue by 2025, expand our operating margins and grow EPS in excess of revenue growth. Specifically, this includes driving same-store revenue growth of $2 billion over five years, acquiring $5 billion of additional revenue over five years and adding an incremental $5 billion of revenue through the new Clicklane platform. In closing, I would also like to thank our teams across the business, who continued to work tirelessly during this unprecedented time to ensure our current and long-term success.

We will now turn the call over to the operator and take your questions. Operator?

Questions and Answers:

Operator

[Operator Instructions] We'll take our first question from Rick Nelson with Stephens Incorporated. Please go ahead.

Rick Nelson -- Stephens, Inc. -- Analyst

Thanks and good morning. So I wanted talk about the same-store units both new and used cars, new down 6%, used down 9%. It sounds like you've taken a strategy where you're going to try to maximize GPUs. If you could speak to that what you think is happening from -- to market share about [Indecipherable] strategy will continue.

David W. Hult -- President and Chief Executive Officer

Yes. Rick, good morning and thanks for the question. This is David. I would tell you we went into it with the approach of, we can see our day supply and where we're at. We're sitting in October, we can see what we have for inventories and what's coming by the end of the year. And we know what a large month December is for luxury. So I would tell you on the new car side, we launched unit sales, because we just weren't chasing volumes because we couldn't replace the inventory. So we just thought it was a better return on our cash to maximize the gross profit as best as possible. As Dan pointed out, even with that strategy in December, we had many stores below at 20 day supply and that's a 20 day supply across all model line, so individual hot models you didn't have any day supply. So there is no question that hurt the unit sales.

On the pre-owned side, again it's not about chasing volume for us it's about maximizing our returns. We make far greater profits when we sell a vehicle that we've traded for then when we go out and purchase a vehicle. So we've tried to be more opportunistic and at least that these challenging months when inventories to and prices are high at the auction to really just maintain the gross as best we can and give the greatest returns we can. So I would tell you, we sat here a quarter ago and thought by the end of the first quarter days supply would be back up to normal, but because what's going on with the microchips and some other things, it's probably going to bleed well into the second quarter before inventories gets back. You never really know how that ends up, but we're going into each month, we're looking at it, how do we maximize our return. Even with some of those numbers, we actually exceeded market share in some markets and some we didn't. We're not looking at that short-term market share gain or loss, we're kind of looking at the overall picture and return. So we're happy with our strategy in the way it's played out so far.

Rick Nelson -- Stephens, Inc. -- Analyst

Great. That's helpful color. I hope so at the inventory front, when things do normalize, it sounds like the back half of 2021 and here current tax expectation. Do you think you can hold down to some of those GPUs? Do we go back to 2019 pre-COVID level? Sort of your expectation there.

David W. Hult -- President and Chief Executive Officer

Sure. As a company, I don't think we'll go back to pre-COVID because the acquisition of Park Place just does move our overall numbers. Do I think that we will maintain this when things get back to normal, I'm sure, there'll be some drop-off in some areas, very difficult to predict what incentives are going to be, what the days supply is going to be like and what the economic conditions. But from everything that we see we're very excited about 2021. We see our business growing in 2021 compared to 2020. And there might be different things moving around in those numbers throughout, but very opportunistic about what 2021 offers. And quite honestly, the acquisition pipeline is certainly active right now. So there's a lot of good things happening in this space and we certainly want to be disciplined and execute as best we can.

Rick Nelson -- Stephens, Inc. -- Analyst

Okay. Just to follow up on that comment about the acquisition pipeline. If you could speak to that what you're seeing in terms of pricing out there. I know you stepped up the buyback authorization as well as your preference to acquisition versus buybacks at the moment.

David W. Hult -- President and Chief Executive Officer

Yes. Rick, I would say generally overall, what gives the greatest returns for our shareholders and the best way for us to deploy capital. The pipeline for our conversations and activity was kind of slow around the holidays, it dramatically picked up in January. And we're having a lot of meaningful conversations with different folks right now. So it's early. We'll see where it goes. But we're very engaged in a lot of conversations and excited about that. As far as the pricing and overall multiples, it's a competitive space right now. And there is a lot of buyers out there. And I'm sure there's a lot of sellers that want to make sure that they're concerned about their legacy and who they sell to. So it will be an interesting year and see what happens. But I'm sure from an M&A perspective, at least what we see so far, it should be an active year.

Rick Nelson -- Stephens, Inc. -- Analyst

Great. Thanks for all of that. Sure, go ahead.

Patrick J. Guido -- Senior Vice President and Chief Financial Officer

Sorry, this is P.J. I would just add that we do have a capital allocation policy. And first and foremost, we want to reinvest in our core business, and then we look to delever to the extent we're over our target. And as I mentioned earlier, we're well below our target, which means our balance sheet has capacity for acquisitions, which as David said, we're maintaining an active pipeline. And to the extent there is cash left over in the waterfall, we would look to return to shareholders.

Rick Nelson -- Stephens, Inc. -- Analyst

Great. Thanks for the color and good luck.

David W. Hult -- President and Chief Executive Officer

Thank you, Rick.

Operator

We'll take our next question from John Murphy with Bank of America. Please go ahead.

John Murphy -- Bank of America -- Analyst

All right. Good morning, everybody. First question on the Park Place acquisition and integration. It seems like we've gone even better than plan on the integration more hiccups whatsoever and actually they are helping to drive the better performance, [Indecipherable]. I'm just curious if there's any lessons learned here on targets or the actual integration process. Exactly what I mean, it's just seems like it's -- still in and actually been sort of a net benefit right off the bat, which is clearly made some acquisition.

David W. Hult -- President and Chief Executive Officer

Sure, John. This is David, I'll start. It really just speaks to the Park Place folks and their level of professionalism changing hands going through a buy-sell 1,400 employees. There's a lot of moving pieces and I'm sure there's a lot of frustrated folks on the Park Place side. I think both sides went at it with the intent that there is a level of respect and trust for one another and work through the issues that came up. But it's truly a credit to them. Certainly in the quarter, the luxury mix that they have in the low-day supply that benefited us as well. But I'll tell you, post acquisition we've got exactly what we thought we're getting, which is amazing teammates, who are really passionate and professional with what they do every single day and committed to what they do.

I would say in the last couple of years, that's been our big difference. When we look at acquisitions, we just don't look at the revenue stream, we're really interested in how the business runs and whether it would be a good steward of the business. And what if the Colorado acquisitions or the Indiana ones, I think so far the model that we're working on as far as when we look at acquisitions and integrate, we've been pretty successful at making sure we would be a good steward of the business.

John Murphy -- Bank of America -- Analyst

Okay. That's incredibly helpful. Just a second question around parts and service, obviously there is some choppiness here. The world and the markets are volatile. So it's somewhat understandable. But if you think about parts and service, when do you think that normalizes, is it post-production sort of mid this year or maybe the second half or could it normalized sooner and how much deferred maintenance you think there's out there that you might catch up on over time?

David W. Hult -- President and Chief Executive Officer

Sure. And just as a reminder, those numbers to our collision numbers and collision still maintains 20% to 30% back from prior year. I'll tell you, the virus, while it's only been around for a year, it feels like it's been around longer and it was dramatic when it first hit, but then it kind of cooled off through the summer and business started bouncing coming back. In the fourth quarter, we went negative in parts and service in November and we came back positive in December. And we're starting January off a little bit more volatility. So I would tell you, these high positive rates that you're seeing across the country and the number of deaths a day over 4,000 are playing an impact on the parts and service business. It varies a little bit by market, but generally that's the theme.

So we feel confident as the vaccines rollout and things normalized parts and service not only comes back, it should have a nice tailwind. To your point on pent-up demand with service work that's our opinion. And they believe right now is somewhere between June and late July, early August is when we think that we should really start to get back in a groove of a normal look in parts and service. Could be sooner, it's hard to predict with what's going on to vaccine and it's very fluid, we're all reading about it every day. But that's the way we see it right now.

John Murphy -- Bank of America -- Analyst

I hope for all of us for the long a sooner, but that's, yes, that's helpful. And then just lastly on SG&A. Obviously, last few quarters you run in the 51% range, grosses are high rates in the year, there will be the denominator it's benefited to some degree. So if you think about SG&A going forward has something structurally changed here that you think that you can operate in this low 60s or maybe even better over time as quickly and it takes off and you're able to leverage the whole base of your bricks-and-mortar.

David W. Hult -- President and Chief Executive Officer

I would say there's three main levers. Like I said in my statement, some of the divestitures and some of the acquisitions really lifted our margins and those were stores that had a history of higher margin business when we were lower margin business. I think there's definitely going to be a sustainable pickup there. We also changed our production per employee when the downturn hit and we stayed disciplined with that. And to your point with Clicklane, it's only three stores, it's one full month, but it's up over 100% pretty close to each. Most of them were luxury brands that we tried Clicklane in. So we're very hopeful between those three levers that there is a meaningful difference here in SG&A over time as well.

John Murphy -- Bank of America -- Analyst

Okay. But would you underwrite 60 -- something in the low 60% range now or you really kind of, saw where this is going to land.

David W. Hult -- President and Chief Executive Officer

Yes. I would say, it's still bouncing around right now. I mean our goal through the next view, I would say, this quarter is maintaining higher operating margins and maximizing our opportunity. Depending when we get back to normal, depending upon where margins lay, I think we'll certainly be in a much better position from an SG&A standpoint than we were pre-COVID. But where exactly about land, I think there's too many variables to call that right now.

John Murphy -- Bank of America -- Analyst

Okay. Thank you very much.

David W. Hult -- President and Chief Executive Officer

Thank you.

Operator

We'll take our next question from Ryan Sigdahl with Craig-Hallum Capital Group. Please go ahead.

Ryan Sigdahl -- Craig-Hallum Capital Group -- Analyst

Thanks for taking the questions. Just wanted to dig in a little bit on the online, so specifically looking at Slide 11 and 12. So it shows internet leads down sequentially or I guess year-over-year down a little bit, online service appointments also kind of trending lower. As you're expanding your Clicklane, you talk about a lot of traction you're gaining online. I guess, can you just talk through the sequential decline and kind of the moving pieces there.

David W. Hult -- President and Chief Executive Officer

Yes. So I'll talk about the decline in traffic and then the comment on Clicklane. One thing is true for our industry, when you have more inventory online you have more leads and more eyeballs on your side. So part of the traffic coming down was lack of inventory, we had more inventory I don't think the leads would have been down as much. The other piece of it was too is trying to be more strategic with the marketing dollars. Knowing we had less of an inventory, it really makes sense to create some supply of leads where we really didn't have the product there to sell it.

On the Clicklane side, the growth that we're talking about on Clicklane, I would say the material difference when we made that comment and I am going to compare PushStart which most of our stores are on today compared to Clicklane it's the conversion. It's not the lead counts up with Clicklane, it's the conversion on Clicklane and is up dramatically from PushStart.

Ryan Sigdahl -- Craig-Hallum Capital Group -- Analyst

Great. And then just on Clicklane. Four rollout by the end of Q1, you have 3 beta tested in December. Can you talk through the cadence of how you're going to roll that out over the next couple of months, and all at once or stage -- what the cadence plan to start?

David W. Hult -- President and Chief Executive Officer

Sure. We have the whole company set up, we're rolling out depending upon the size of the stores and when anywhere between eight to 12 stores a week. And we'll also include toward the tail end of the quarter Park Place, which in the fourth quarter did not offer in online transactional tool at all. So they'll get their first shot or first look at it if you will, at the end of Q1. It wasn't at all in their sites in Q4.

Ryan Sigdahl -- Craig-Hallum Capital Group -- Analyst

Okay. Thanks and I'll turn it over. Good luck.

David W. Hult -- President and Chief Executive Officer

Thank you.

Operator

We'll take our next question from Adam Jonas with Morgan Stanley. Please go ahead.

Adam Jonas -- Morgan Stanley -- Analyst

All right. Everybody can you hear me?

David W. Hult -- President and Chief Executive Officer

Yes.

Adam Jonas -- Morgan Stanley -- Analyst

So a couple of questions for you here. So a couple of questions for you here. [Indecipherable] sales in ICE-powered vehicles. I'm just wondering if you could refresh us on as a rapid move to EV in any concern, a long-term debt holder about your business, including your P&S business. And I'm also noticing a lot of start-ups are moving to direct to consumer models. And they insist, they don't want to use existing dealer franchises. Apple is entering the auto industry, it's our understanding they don't want to do a franchise dealer model, although that's not fully confirmed but they want to control the downstream distribution. If there are -- David that you're acquiring legacy brick-and-mortar dealerships that still sell legacy ICE OEM products, ICE intense P&S, how can you assure shareholders that you're not doubling down on this ICE legacy tech at the worst possible time at the end of the ICE? Thanks.

David W. Hult -- President and Chief Executive Officer

Sure, Adam. I would tell you that our manufacturer partners have been building quality cars for a long time and they're all in the process of transitioning to EV and we'll certainly go along for the ride in the journey with them and be great partners to them. And I would tell you like any industry that has spurts if you will. There's a lot of EV companies that are coming out, we'll see which ones make and which ones don't, which ones consolidate and which one share and sell their technology. I would also tell you, as I'm sure you're aware, some of them that will be launching car soon. But literally as we speak, working with third-party vendors to try and figure out how they're going to handle parts and service on the back side.

So I don't think that's a well thought out model either. And I think there is something about -- there's something tried and true to the supply chain and mechanisms that work now. So the mechanism whether it's ICE or electrification or hybrids or whatever it might be, it doesn't really matter. We're here locally in the community to sell and service the vehicles and have been for many years and have a strong reputation and know how to do it. We're not making it up as we go. We're figuring out as we go or how to handle a recall.

Adam Jonas -- Morgan Stanley -- Analyst

Appreciate, David. Thanks.

Operator

We'll take our next question from Rajat Gupta with JPMorgan. Please go ahead.

Rajat Gupta -- JPMorgan -- Analyst

Good morning everyone. Thanks for taking my questions. Just a follow-up on the SG&A question earlier. I'm not sure if I missed it earlier, but could you give us a sense of where you expect the SG&A growth to lined up like in some sort of range that anything you want to walk around for this year, just based on what are the expectations are for GPUs [Indecipherable] rest of the year. And I have a follow up. Thanks.

Patrick J. Guido -- Senior Vice President and Chief Financial Officer

Yes. Rajat, it's P.J. So on SG&A, as David mentioned, it's difficult to forecast in this environment. What we do know is the leverage we generated in Q3 and Q4, predominantly driven on the personnel side and then the balance in advertising and other related costs. What we have confidence in is that those -- there are structural changes there that we will continue to benefit from in the form of higher productivity whether it's units per salesperson, average growth per associate, we track a lot of metrics. And we do see that our productivity is up and we hope to or we are confident that we can retain that. As the production comes back online, again, we're looking at the latter half of the year. We do expect to see some pressure on growth, which will put pressure on SG&A. But again, the structural changes we've made and the fact that we're very active in managing expense gives us confidence that our SG&A will be -- will continue to be favorable.

Rajat Gupta -- JPMorgan -- Analyst

Got it. Is there anything within the SG&A [Indecipherable] any follow in the execution around advertising might look like, which again in the context of rolling on this Clicklane platform and even broadening the reach of that platform. Outside just normalization in advertising spending back to pre-COVID level, should we expect a further after beyond that? Just for Clicklane purchase or is that another case?

David W. Hult -- President and Chief Executive Officer

This is David. And if I got the question wrong, I apologize. It was cutting in and out a little bit, but as it relates to marketing in Clicklane, if you look at us against our peers, we've traditionally and still do, I guess I can't speak for the fourth quarter, but prior to that have the lowest dollars per car spend in marketing. So I think it was a business we're going to get. Once Clicklane is fully rolled out in our stores by the end of Q1 for the first time we will make an investment and spend some dollars marketing Clicklane to drive traffic. We never really marketed PushStart that much. We will market Clicklane.

So I don't know that you'll see much of a meaningful difference in the PVR at the end of the quarter, but there will be some dollars spent on it. The SG&A, because we've kept our head count down our productivity is up, there is always opportunity in compensation and certainly operating expenses. And I think we've been fairly disciplined over time regarding that and we'll continue to look at that. And we think our plan moving forward will keep us certainly competitive and probably in the better half with our peer group.

Rajat Gupta -- JPMorgan -- Analyst

Got it. That's helpful. Just last one for me, any color, when you talked about like the chip shortages and like the margin strength here in the near-term. Any color on what January was in terms of just units? Is there -- are you seeing the same situation that is in the fourth quarter with respect to the demand with the GPU trade out? Or has any change so far in January? In general, how is the demand environment looking like here in January?

David W. Hult -- President and Chief Executive Officer

Sure. Yes, absolutely. In January, always a little bit of a letdown from December, but I would tell you compare this January to the last 35 have been in the business was very surprised by the activity and the overall performance in January it was amazingly resilient and we're very pleased with how January look. I will tell you, it's the same frustration very low day supply in a lot of areas. So there is that potential, what you could have sold compared to what you did sell just because of lack of inventory. But considering what went on with the pandemic in the month of January in the horrible numbers, we all saw nationally it was a productive January for us.

Rajat Gupta -- JPMorgan -- Analyst

Got it. That's helpful. All right. That's all for me. Thanks and good luck.

David W. Hult -- President and Chief Executive Officer

Thank you.

Glenn Chin -- Seaport Global Securities -- Analyst

Great. Thank you. Good morning, gentlemen. So, David perhaps a question for you. I'm getting a lot of questions from investors just regarding the achievability of revenue and implied by in targets to Clicklane. Can you just remind us or share with us maybe a framework or the assumption underlying some your goals for Clicklane. Maybe if you could just start at the top of funnel and then narrow it down first? Maybe starting with TAM, the number of leads you expect to get from that, the conversion rates and the market share that ultimately implies?

David W. Hult -- President and Chief Executive Officer

Sure. I'll -- and if I don't explain it well, Glenn, please just come back at me. We will start to spend money on Clicklane and we do expect additional traffic because of that. But when we talk about our model of the $5 billion with Clicklane it actually is not accounting for any additional traffic. It's basically looking at the traffic we have now and looking at the conversion on post-start and what we believe the conversion will be with Clicklane. So, for lack of a better term, if we had a 100 leads on PushStart and we close 10 of those leads out of 100 that's your conversion that 10% number. If we had those same 100 leads with Clicklane, we believe that number will be more than double that in year one. And by the time we get to year five like any -- tool enabling that takes place online, you think about airlines tickets when they first converted to online people who used to calling in, if you remember at the time they actually charge you more to call and then online because they were trying to push online. Once the acceptance level is there and people realize you can do a full transaction, we believe over the next five years that number will go up materially.

So we think 100% of the people are going to buy online, no, of course, not. But we certainly believe somewhere between 30% and 50% of the consumers will transact online over the next five years. So it's basically taking our traditional conversion rates. Looking at what push -- I mean, what Clicklane can do against PushStart and modeling that out over five years, which really no incremental growth on the Clicklane tool itself. So we think we're very conservative in our numbers in our approach. And again, one month out of the gate with only three stores, but within those three stores, you had [Indecipherable] luxury brands in a mid-line import. And I would tell you, again, month one out of the gate, we were conservative on our conversion numbers.

Glenn Chin -- Seaport Global Securities -- Analyst

Okay. And just speaking about that five-year window, David. I think you're quoting in Automotive News interview saying that you expected not Clicklane, but sort of the Clicklane type capability to be promising throughout the industry within two years. So after that two-years, when it is [Indecipherable] around the dealer network nationwide, do you expect that conversion rate or the traffic to diminish given the increased competition online.

David W. Hult -- President and Chief Executive Officer

I don't, I kind of look at is, when the websites came online in the late 1990s, early 2000, walk in and phone traffic and now there was Internet. It just -- the traffic flows move into different channels. The benefit here to the overall automotive space will be the level of satisfaction to the consumers, the speed or an experience that the consumers can go through and how transparent it will be and how that will be beneficial and controlling cost within a store with the use of a tool like this really being accepted in this space. That's the opportunity that is really meaningful.

Glenn Chin -- Seaport Global Securities -- Analyst

And then the $5 billion target, David, is that all new and used retail? Is any of that parts and service or F&I?

David W. Hult -- President and Chief Executive Officer

Well, some of it's F&I, for sure. But no, it's not parts and service, it's just simply sales. When we talked about the five-year plan and we talked about the $2 billion in revenue growth in our store count, it didn't assume any acquisitions, obviously and we looked at our same-store sales what we have now and then we look to over the next five years, we looked at our service retention numbers, our market share numbers and where we thought what we can do with the brand. We did not factor in any economic downturn in that five-year model. We kind of assume a SAAR somewhere between 16% and 17% over that five-year period. Very conservative numbers, is everything that we do. So we just kind of modeled it that way and that's where the numbers laid if you will.

Glenn Chin -- Seaport Global Securities -- Analyst

Okay. I guess my question around F&I, David was not so much around volume because obviously you got a less increased volume of retail sales. But more around, I guess, increased penetration or attachment rates you're expecting with that.

David W. Hult -- President and Chief Executive Officer

That's going to be subject because it's over time. But again, and it's a small sample. I'll talk to the four luxury stores and one mid-line import. And it's in three stores, but one store has multiple brands. I would tell you we're very pleased with the F&I numbers that we've seen so far. Again, I know it's only a few stores, I talked only 30-day, but in most cases were up significantly in F&I dollars per vehicle with the Clicklane tool so far, more than we forecasted for.

Glenn Chin -- Seaport Global Securities -- Analyst

And what do you think might be driving that?

David W. Hult -- President and Chief Executive Officer

I think there is a convenience of consumers and consumers selling themselves. Most people sell themselves on something before they ever go out and purchase it and they justify why they're going to buy it and what they're going to pay for it. I think we focus on products that add value to the vehicle. The average length of ownership is almost 12 years in the country. There is a big purchase a big expense. I think if you can present products professionally price it fairly and give information on the products to allow consumers to make an educated decision. What you end up with is selling products.

Glenn Chin -- Seaport Global Securities -- Analyst

Okay. Great. Thanks very much. I appreciate the feedback. And just a quick housekeeping follow-up for P.J. P.J., did you guys say that your leverage target has changed, it was 2 times to 3 times, is it now just 3 times someone's asking?

Patrick J. Guido -- Senior Vice President and Chief Financial Officer

Yes. Hey, Glenn. So it's typically been or it's typically been 3 times, so 2 times to 3 times that's kind of a big window. Our target 3 times, we feel like that conservative imbalances both risk enables us to put the balance sheet to work.

Glenn Chin -- Seaport Global Securities -- Analyst

Okay. But just to clarify. Has your thinking around for you guys changed?

Patrick J. Guido -- Senior Vice President and Chief Financial Officer

No. 3 times.

Glenn Chin -- Seaport Global Securities -- Analyst

Okay. Very good. All right. Thanks very much, gentlemen. Good luck.

David W. Hult -- President and Chief Executive Officer

Thank you.

Patrick J. Guido -- Senior Vice President and Chief Financial Officer

Thank you.

Operator

We'll take our next question from Stephanie Benjamin with Truist. Please go ahead.

Stephanie Benjamin -- Truist -- Analyst

Hi. Good morning.

David W. Hult -- President and Chief Executive Officer

Good morning.

Patrick J. Guido -- Senior Vice President and Chief Financial Officer

Good morning, Stephanie.

Stephanie Benjamin -- Truist -- Analyst

I wanted to ask a bit about the used side of your business, just looking at whether it's growth or margins themselves decelerated in the fourth quarter still, obviously up on the growth by year-over-year. But you could speak a little bit about that, just given, we did see actually a slight acceleration in ASPs and even the unit performance. So if you could kind of walk through what you're seeing on the used business. Thank you.

David W. Hult -- President and Chief Executive Officer

Yes. Stephanie, this is David. I would say, the best way to describe the used business right now is our goal is not to chase volume. Our goal is to chase return. We really track all the different avenues whether we purchased a car and the service charge, whether we acquired off the street whether we take it in trade or buy it at an auction and we say, what's our best investment and how do we get our highest return. I would say, we're very happy with our margin performance on pre-owned being up 10% in gross profit was kind of the target where we want it to be. I would tell you, the margins are not deceiving, but the cost of sale has really jumped up a lot. And if you think about it, it's probably up a couple of thousand dollars since 2018. I think we ended the quarter over $24,000, close to $24,400.

And when you think back at the end of Q4 2018, it was $22,010. So a material increase in cost of sales is going to have an effect on the margin. But just as a GPUs standpoint in Q4 of 2018, we were $15,041 a car. So we're still running a couple of hundred dollars a car ahead of where we were in a competitive market space and that's based on a same-store number. So we're confident in our plan. It's just really being opportunistic where we acquire inventory from. Our ability to make money in pre-owned is not going to be above the sale price, because the market dictates that it's really going to be about the acquisition price. And we're really trying to have a strategic plan on how to acquire the inventory and not just turnover the inventory at a low margin, but turn it over to a fair margin.

Stephanie Benjamin -- Truist -- Analyst

Great. And to follow up on that, as you rollout Clicklane and you noted some incremental kind of advertising or support behind that tool. Will that also include possibly some advertising about supplying your vehicle, through an online component kind of like some of your pure digital used peers out there and then buy your cars. Is that something up on the table?

David W. Hult -- President and Chief Executive Officer

Yes. It's in the tool and the quick answer is, yes. It's on the homepage of the websites that are on those stores now. But absolutely as a part of it, yes.

Stephanie Benjamin -- Truist -- Analyst

Got it. Well, thank you so much.

David W. Hult -- President and Chief Executive Officer

Thank you.

Operator

We'll take our next question from Bret Jordan with Jefferies. Please go ahead.

Bret Jordan -- Jefferies -- Analyst

Good morning, guys.

David W. Hult -- President and Chief Executive Officer

Good morning.

Bret Jordan -- Jefferies -- Analyst

On the Clicklane, I guess in the test stores, is there any, I guess, information anecdotal may be that these are incremental customers or is it just a better conversion of folks that would have been coming to an Asbury store in the first place.

David W. Hult -- President and Chief Executive Officer

Bret, again, it's early on, it's a few stores. So I can share stories and give you real numbers. The answer is yes. It's both. It's higher conversion of the customers you may or may not have had before, but it's also we're seeing acquisitions, what I would call outside of our marketplace with pre-owned. And I think it's because they can actually do the transaction online, and I'll just give you one anecdotal sale. It was a $97,000 used Land Rover that was sold from our Greenville store in South Carolina and the person lived in the DFW marketplace. They put $13,000 down on their credit card, they finance the balance and did the whole transaction online and we delivered the car over 950 miles away. And obviously, there were a lot of local dealers and quite honestly, one of them was Park Place within that market space.

When you talk to that consumer, it was the ease and transparency with the vehicle that they wanted to be able to do the whole transaction online and have it be so transparent seamless with a great experience for them. So that's one story, we have many like that. But just I think the awareness of consumers actually they've all wanted this for a long time. So to know that it actually exists out there, a lot of them are stumbling on it by mistake when they see it on the website.

Bret Jordan -- Jefferies -- Analyst

Are you finding just a different customer reaction between mid-line and luxury? I guess, you done that for us at a KIA dealership in Florida, are you seeing that luxury buyers are more likely to do in online and transaction in mid-line or is it similar?

David W. Hult -- President and Chief Executive Officer

It's a fantastic question, I'd like to give you an honest answer by saying, I'd like to give you my thoughts before we started it and then tell you what the reaction was or the real numbers. Before we launched it, I assume they would take off with mid-line imports. And I was concerned what would happen with the luxury buyer. After December like usual I was wrong. It was accepted really well by the luxury buyers, it had nothing to do with price transactionally, it did well with the midline imports customers too, but I expected that. I was shocked how well it did with the luxury buyers.

Bret Jordan -- Jefferies -- Analyst

Thanks. And I guess maybe you might have told us is before, but the $5 billion expected Clicklane revenues in 2025, what's the mix of new versus used in that outlook.

David W. Hult -- President and Chief Executive Officer

So we kind of stick to our same -- well, I'll tell you this, with PushStart when we initially launched PushStart right out of the gate, it was a majority of new to used sales. Very soon it transitioned within months and it stayed there for years to where over two-thirds of it was pre-owned and a third of it was new. As we start off with Clicklane it's close to the 50-50 right now. But the way we've modeled it in, we've kind of again, we want to get granular with our five-year plan. And so we've built the five-year plan literally by rooftop. So we kind of kept to our used to new ratio, and then we kept the same sales volume just higher conversions on Clicklane.

Bret Jordan -- Jefferies -- Analyst

Great. Thank you.

David W. Hult -- President and Chief Executive Officer

Thank you.

Operator

We'll take our next question from David Whiston with Morningstar. Please go ahead.

David Whiston -- Morningstar -- Analyst

Thanks. Good morning. A question on Toyota's announcement yesterday on their new e-commerce platform. A lot of the capability to meet on a very similar to Clicklane, obviously at the end they do transfer the customer over to a dealer. But I'm just curious, having more automakers having a capability of their own like Clicklane, does that help you, hurt you or is it really neutral?

David W. Hult -- President and Chief Executive Officer

Thanks for the question, Dave. This is David. I'll answer it the way I did in December on the Investor Day. I think it helps to space overall. Our franchise system is being challenged now. As John talked about earlier with start-up companies coming into this space, I think there is tool really levels that playing field and changes the experience. So I am excited to see my competitors within the franchise system get the tool and get them to see the benefits of it. So we actually see this is a very positive thing for our space and helps us in the long run dramatically.

David Whiston -- Morningstar -- Analyst

Okay. And on the used market, I'm just wondering if you could contrast or maybe compare that today's new vehicle customer seems very like truck focused and very on the high end trims focus versus a use customer who may be -- the used customer wants a van. Just what kind of differences that you're seeing in preferences between those two channels?

David W. Hult -- President and Chief Executive Officer

Dave, it's a great question. And I'll jump in and then -- this is David and then, Dan, if he wants. It's the same on the pre-owned and because it's more discretional income right now with what's going on, because people are spending on vacations are in bars or restaurants that kind of things. We've seen higher down payments in 2020 and we saw higher credit scores in 2020. And you could see that by the jump in our cost of sale of pre-owned people are stepping up buying more car with more equipment. They are looking for the trucks and the SUVs, when you have a used truck, you can't go wrong with it and it's going to move very quickly. When you have a nice sedan depending upon the price market that it's in, it may turn quickly or it may sit a little bit, but the used business is the same as the new, it's predominant SUV and truck.

David Whiston -- Morningstar -- Analyst

So in your opinion are sedans just going to keep shrinking? Do you think like car penetration stabilizes now or keeps growing?

David W. Hult -- President and Chief Executive Officer

It's hard to say, I mean, over the last few decades, we've seen a lot of movement in a lot of different areas. And as you see electrification coming in, battery anxiety when you get to the SUV size and bigger vehicles, how that's going to come into play. There is still a huge issue that hasn't been addressed in the country with an infrastructure to support it. The demand there from the OEMs coming out of the products in the start-ups and there is the incentives there from the government, but there is not an infrastructure to charge it and support it. So I think and also the range anxiety that you talk to -- when you talk to customers that aren't just willing to go there yet. All that will change over time and things will get better and battery life will get better. But I'm sure no differently than we all know this that the electric cars that have been out there for years now. As they get out there 80,000, 90,000 miles their battery life as far as charging goes isn't what it was when the car was no. So there's a lot of things to work out over time with electrification to see how that goes. And what role that will play as it relates to sedan, SUV and truck market.

David Whiston -- Morningstar -- Analyst

Okay. And last question on the new generation of F-150, your four customers really anxious to buy that truck?

David W. Hult -- President and Chief Executive Officer

Yes. It's a great question, David. I honestly can't say. We're not hearing, I'm not hearing a tremendously high demand right now. There is a tremendous amount of curiosity about seeing it and what it looks like and what the numbers would be as far as range and all that stuff. But I'm just not hearing it.

Dan Clara -- Senior Vice President of Operations

No, this is Dan, David. I have not heard anything in regards to that to be our new F-150. Although as you know the truck buyer is very, very loyal to the brand, probably one of the most loyal ones out there. So I would expect that there are loyal Ford buyer is definitely excited about it and can't wait for it to come out.

David Whiston -- Morningstar -- Analyst

Okay. Thanks, guys.

David W. Hult -- President and Chief Executive Officer

Thank you very much.

Matt Pettoni -- Vice President of Finance and Treasurer

This concludes today's discussion. We appreciate your participation and look forward to talking to you at the end of the quarter.

Duration: 61 minutes

Call participants:

Matt Pettoni -- Vice President of Finance and Treasurer

David W. Hult -- President and Chief Executive Officer

Dan Clara -- Senior Vice President of Operations

Patrick J. Guido -- Senior Vice President and Chief Financial Officer

Rick Nelson -- Stephens, Inc. -- Analyst

John Murphy -- Bank of America -- Analyst

Ryan Sigdahl -- Craig-Hallum Capital Group -- Analyst

Adam Jonas -- Morgan Stanley -- Analyst

Rajat Gupta -- JPMorgan -- Analyst

Glenn Chin -- Seaport Global Securities -- Analyst

Stephanie Benjamin -- Truist -- Analyst

Bret Jordan -- Jefferies -- Analyst

David Whiston -- Morningstar -- Analyst

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