Hesterberg: “These results demonstrate our ability to grow earnings in a flat retail sales environment.”
Group 1 Automotive Inc.’s gross profit and revenue climbed in the second quarter, driven largely by gains in the used-vehicle business and growth in the United Kingdom.
Revenue for the Houston dealership group, which has stores in the U.S., U.K. and Brazil, rose 10 percent to $2.94 billion, with the biggest contributor being a 20 percent jump in used-vehicle revenue. Group 1’s total gross profit increased 8.2 percent to $438.2 million.
Revenue and gross profit gains in the U.S. business were much narrower than the overall increases. U.S. revenue inched up 2.1 percent to $2.17 billion, while U.S. gross profit rose 3 percent to $350.7 million.
The company’s net income surged 44 percent to $56.5 million during the quarter, boosted in part by a $5.7 million net after-tax adjustment. The adjustment consisted of a net gain on real estate and dealership transactions totaling $15.2 million that was partially offset by a $4.4 million impact from catastrophic events, noncash asset impairments of $3.2 million and legal settlements of about $2 million.
“We delivered a solid quarter, reflecting a relatively strong U.S. vehicle market in June, favorable overall performance in the U.K., a corporate-wide focus on our used vehicle business and a major cost reduction initiative in both the U.S. and the U.K. early this year that began to pay dividends this quarter,” Group 1 CEO Earl Hesterberg said in a statement Thursday. “These results demonstrate our ability to grow earnings in a flat retail sales environment.”
Sales: New-vehicle sales slipped 1.3 percent to 30,388 in the U.S., while used-vehicle retail sales increased 13 percent. Same-store sales: On a same-store basis, new-vehicle sales in the U.S. declined 2.9 percent to 29,830, falling short of the 1.8 percent increase in the U.S. industry’s new light-vehicle sales in the quarter. International operations: Gross profit at Group 1’s U.K. operations rose 47 percent to $74.8 million on a 53 percent climb in revenue to $666.9 million. In Brazil, gross profit decreased 5.9 percent to $12.7 million. Revenue fell 2.5 percent to $108.6 million.
In the first quarter, Group 1 in the U.S. launched Val-U-Line, a proprietary brand for older-model, higher-mileage used vehicles. In the second quarter, the company “really focused on this Valu-U-Line initiative, where we’re taking a look at older-model cars that traditionally would have gone to the auction,” Pete DeLongchamps, Group 1 senior vice president of manufacturer relations, financial services and public affairs, told Automotive News. “We have redoubled our efforts on retailing those particular cars. It’s changed from about 5 percent of that type of car to above 10 percent of our overall used-car business.”
Group 1 ranks No. 3 on Automotive News‘ list of the top 150 dealership groups based in the U.S., with retail sales of 172,200 new vehicles in 2017.
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