Group 1 to revise pay plans after Q4 net income drops 18%
 | Hesterberg: "Some of the structures we had in place were probably better served in a 13 million-unit (U.S. sales) industry." |
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Group 1 Automotive Inc. will tweak its pay plan for dealership sales staffers after the retailer's fourth-quarter variable compensation expenses came in $2 million higher than expected -- contributing to an 18 percent drop in fourth-quarter net income.
The compensation increase was the biggest contributor to a $4.5 million miss in Group 1's expected selling, general and administrative expenses for the final three months of 2012, CEO Earl Hesterberg said today in a conference call.
"Some of the structures we had in place were probably better served in a 13 million-unit (U.S. sales) industry than a 15 or 15.5 million-unit industry," Hesterberg said. "Some of our structures may have been weighted too much toward volume and not enough toward gross profit."
Hesterberg added that Group 1 probably has been selling too many vehicles at "virtually no vehicle gross profit" because of its strength in the finance-and-insurance department and the likelihood of good profits there.
The company declined to offer details on the compensation changes. But Group 1 generally will strike a better balance between the incentives tied to volume and those tied to vehicle gross profits. Going forward, the gross profit metric will have a bigger role than it did in the fourth quarter.
Other reasons for the increased quarterly expenses included a $1.6 million workers' compensation accrual, plus a $750,000 investment in several business initiatives expected to drive future growth.
Full results
Group 1 reported net income in the fourth income of $17.1 million, down from $20.9 million for the year-earlier period. Group 1 said its adjusted quarterly net income was $24 million, up 9 percent from $22 million. Total revenues for the quarter increased 19 percent to $1.9 billion.
For the full year, Group 1 reported a 22 percent jump in net income to $100.2 million. Group 1 said its adjusted full-year net income of $108.2 million was a record for the company. Full-year revenue rose 23 percent to $7.5 billion.
The results, released early today in a statement, spooked Wall Street. Group 1 stock plunged 7.5 percent to close at $61.62 per share today.
For the full year, Group 1 reported a 22 percent jump in net income to $100.2 million. Group 1 said its adjusted full-year net income of $108.2 million was a record for the company. Full-year revenue rose 23 percent to $7.5 billion.
Asbury results
Separately, Asbury Automotive Group Inc. reported gains in sales and net income for the fourth quarter.
Asbury said it posted net income of $22.8 million during the quarter, up from $21.5 million during the same quarter the previous year. Total revenue rose to $1.21 billion from $1.06 billion from the previous year.
For all of 2012, Asbury reported net income of $82.2 million, up from $67.9 million in 2011. Total revenue improved to $4.64 billion from $4.14 billion in 2011.
You can reach Amy Wilson at awilson@crain.com.
