2013: In the books
RetailerRevenue% Change% IncomeNet changeU.S. new unit sales% changeU.S. used unit sales% change
Group 1$8.9 billion19$114 million14125,069485,3656
Asbury$5.3 billion15$109 million3487,9591069,45421
Note: Comparisons are to 2012 results. Source: Group 1 Automotive Inc., Asbury Automotive Group

Public retailers scout for U.S. stores

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Public retailers Group 1 Automotive Inc. and Asbury Automotive Group see opportunities to buy more U.S. dealerships this year and are wasting no time getting started.

Group 1 acquired Ford and Hyundai stores in Escondido, Calif., on Jan. 21. The stores are expected to generate $135 million in annual revenues. In early February, Asbury said it bought a Land Rover store in Greenville, S.C., that is expected to add $20 million in annual revenues.

For Group 1, though, the fast start may be misleading. Planned acquisitions will probably slow this year from last year's brisk pace, CEO Earl Hesterberg said during a conference call this month with analysts after releasing strong 2013 earnings.

In 2013, Group 1 acquired 38 dealerships that are expected to generate $1.3 billion in annual revenues. That included the fourth-quarter acquisition of nine franchises expected to add $350 million in annual revenues. The group also disposed of seven dealerships responsible for $318.9 million of annual revenues in 2013.

"Our results last year were distorted by the large acquisition in Brazil" in the first quarter, Hesterberg said. "We made one acquisition this year, but I don't expect us to do a billion dollars plus this year. I would expect our activity to be significantly less than last year."

The addition of the overseas dealerships and double-digit percentage revenue gains across all its business lines helped Group 1's fourth-quarter net income grow 27 percent to $21.7 million.

Although its buying may slow, Group 1 still plans to grow through strategic acquisitions. The stores the company buys this year most likely will be in the United States, Hesterberg said.

"I think the opportunities are more in the U.S. at the moment," he said. "We'll look to expand in the U.K. because more scale would benefit us there. We'll also be very careful about expanding in Brazil until we get the core platform where we want it." Hesterberg offered no specifics on any targeted markets, but he said California was a strong market in the fourth quarter.

Group 1 CFO John Rickel told analysts that as of the end of 2013, $228 million was "available in our acquisition line," which also could be used for other purposes, out of total cash and available credit of $300.4 million.

Asbury executives, with the Land Rover store purchase, say they are well ahead of their planned acquisition pace. In late 2012, company executives said they intended to acquire stores representing $400 million to $600 million of additional annual revenues through the end of 2015.

Since then, Asbury has acquired six dealerships with expected annual revenues of $195 million.

"We feel confident we'll be able to get that program executed," Asbury CEO Craig Monaghan told Automotive News this month after the company reported an 18 percent gain in fourth-quarter net income. "We just can't tell you when. We've got the capital. There's no question about that. When we find the right deals, we'll buy them."

Asbury had $281 million in cash and available credit at the end of 2013.

Asbury is "wide open" to buying large platforms in new cities or single stores in existing markets and can write a check for $100 million or more, Monaghan said. Executives want to stay in or near the company's current footprint in the Southeast.

You can reach Amy Wilson at awilson@crain.com.


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