Group 1 eager for more acquisitions as profits rise
Hesterberg: “Group 1 reported all-time, record-setting revenues, gross profit, net income and diluted earnings per common share in the third quarter."
Store acquisitions slowed during the third quarter for Group 1 Automotive Inc., but CEO Earl Hesterberg is still working to put deals together.
"It's still our intention and desire to grow the company, and that's still our preferred use of our cash," Hesterberg said today after the retailer announced record third-quarter earnings.
"We still have good liquidity. So we'll continue to work that direction."
Finding desirable stores at a good price has been getting difficult, but Group 1 announced the purchase this week of a Hyundai store in Oklahoma City that is expected to add $45 million in annual revenues. Group 1 also purchased a Hyundai store in Houston in August that is estimated to generate $30 million in annual revenues.
The company also is involved in discussions about other deals, officials said.
Since July, Group 1 has disposed of three stores: a Lincoln store in Houston that generated $17.6 million in revenues during the past 12 months; and Nissan and Mazda dealerships in metropolitan Boston that generated $67.2 million in revenues during the past 12 months. The stores were not meeting performance targets, Hesterberg said.
Despite the recent acquisitions, Group 1 is still below the acquisition pace it set during the first half of the year. During that period, Group 1 acquired 12 franchises expected to generate $504.5 million in annual revenues. Several were in the United Kingdom.
Said Hesterberg: "It is difficult, and it has been difficult. But we've been able to find ways to grow our company, and we're going to continue to find ways to do that."
Record third quarter
Meanwhile, Group 1 today said its third-quarter net income vaulted 46 percent led by record finance-and-insurance revenue and gains in all of its business segments.
The company reported net income of $31.3 million for the quarter, up from $21.5 million during the same quarter last year. Revenues surged 25 percent to $1.98 billion during the quarter.
"Group 1 reported all-time record-setting revenues, gross profit, net income and diluted earnings per common share in the third quarter, driven by strong growth in all segments of the business, including record results in finance and insurance," Hesterberg said in a statement.
"Group 1's new vehicle unit sales continue to outpace industry retail sales, reflecting the strength of our brand mix and strong execution by our operating team."
The retailer posted strong gross profit gains across all its business lines. F&I led the way with a 35 percent improvement to $69.5 million.
New vehicle unit sales rose 34 percent during the quarter to 34,532, while total used vehicle sales gained 21 percent to 34,482 units.
Despite the record quarter, Wall Street wasn't overwhelmed even as company profits met analyst expectations, Reuters reported. Group 1 shares fell 2.2 percent to close at $60.47 for the day.
For the year to date, Group 1 said it has posted net income of $83.1 million, a 35 percent gain over the same nine months of last year. Total revenue has risen 24 percent to $5.54 billion.
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