Group 1 Posts 49 Percent Increase in 1Q Profits
Group 1 Automotive Inc.'s adjusted net income increased 48.5 percent to $15.5 million for the quarter ended March 31.
HOUSTON — Group 1 Automotive Inc.'s adjusted net income increased 48.5 percent to $15.5 million for the quarter ended March 31.
On a GAAP basis, including $0.1 million of net after-tax adjustments, first quarter net income was $15.4 million.
Total company revenues for the quarter increased 18.3 percent to $1.4 billion, primarily driven by higher new-vehicle sales. Gross profit grew 8.4 percent to $221.8 million, reflecting increases in all business segments. Selling, general and administrative expense as a percent of gross profit improved 210 basis points to 79.3 percent, as the company continued to leverage its reduced cost structure.
First Quarter Operating Highlights
• New-vehicle revenues increased 21.5 percent on a 19.7 percent increase in unit sales.
• Used-vehicle revenues were 19.6 percent higher.
• Parts and service revenues increased 5.1 percent.
• Retail new-vehicle and used-vehicle gross profit increased 8.6 percent and 9.3 percent, respectively.
• Retail used-vehicle gross margin expanded 70 basis points sequentially to 8.9 percent.
• Finance and insurance gross profit per retail unit increased $16 to $1,068.
• Selling, general and administrative expense as a percent of revenues improved 150 basis points, to 12.5 percent.
“These results demonstrate our continuing focus on growing top-line revenues in all business segments while leveraging our improved cost structure,” said Earl J. Hesterberg, Group 1’s president and chief executive officer.
Japan Supply Update
“Everyone at Group 1 would like to extend our sympathies to the victims and their families of March’s earthquake and tsunami that devastated northeastern Japan,” said Hesterberg. “Our thoughts are with those who suffered losses in this disaster.
“Group 1 anticipates some near-term impact to new car deliveries and sales in the coming months. Although the manufacturers are working diligently to assess the situation, it is still too early to determine the severity or length of the production disruptions. We do know that the major issues relate to Japanese brands and there is a probability of a 30 percent to 50 percent reduction of deliveries of some Japanese models this summer. Group 1 had adequate new-vehicle inventory at March 31, with 51 days’ of total supply on hand and 50 days’ supply of our Japanese brands. If deliveries are reduced to the extent mentioned above, it is likely that inventory levels will constrain sales for the second quarter and possibly third quarter.
“Fortunately, we know how to manage the business in a low-inventory environment, particularly with the import brands, as those inventories have historically been in very short supply from time to time during the last 10 years. For stores that could be impacted by limited new-vehicle inventory, we are adjusting advertising and other expenses, and expect to achieve higher new-vehicle gross margins in the coming months. Although there have been a few replacement parts where orders are being filled on a ‘need’ basis, there has not been an impact on our parts and service business. During the coming months, we will continue to monitor the situation and will shift more of our focus to our higher-margin used vehicle and parts-and-service businesses, which account for more than 65 percent of our total gross profit.”
Corporate Development Update
As previously announced, Group 1 has acquired Ford, Volkswagen, BMW and MINI franchises in 2011 that are expected to generate $150 million in total estimated annualized revenues.
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