Group 1 warns weather will dent 1st-quarter sales, profits

Hesterberg: "It is unlikely that all of the sales will be recovered in the first quarter."
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Group 1 Automotive Inc., citing severe winter weather that has forced stores to close and showroom traffic to decline, warned Tuesday that its first-quarter earnings will come in lower than expected.

Snowy and icy weather caused "significant" interruptions in business at 105 of Group 1's 118 U.S. stores -- particularly those in the Northeast, the dealership group said in a statement.

The severe weather interrupted store business one to three days per storm, causing hazardous driving conditions and road closures that resulted in store closures or a significant decline in store traffic, Group 1 said.

For the quarter, the winter storms' impact equates to 391 lost store selling days, the company said. Group 1 said that's about a 9 percent drop in available selling days through Feb. 16.

In January, U.S. light-vehicle sales dropped 3 percent, with winter weather blamed for much of the decline.

"The severity and extremely widespread nature of the storms this year is far beyond our normal experience," Group 1 CEO Earl Hesterberg said in a statement. "We would ultimately expect new and used sales not to be lost, only deferred, but it is unlikely that all of the sales will be recovered in the first quarter."

"More importantly," Hesterberg added, "lost service days are difficult to recover as our service capacity is somewhat finite."

Also, many of the stores impacted by the winter storms are spending "above normal amounts" on snow removal and lot cleaning, Hesterberg said.

Stores that have been affected include those from Houston to New Orleans to Atlanta, which are normally safe from winter weather, Hesterberg said.

Also affected were Group 1's dealerships in Boston, New Jersey, New York, New Hampshire, Oklahoma and Kansas.

This month, Group 1 reported fourth-quarter net income rose 27 percent to $21.7 million, helped by the addition of overseas dealerships and global double-digit revenue gains across all business lines.

Revenue during the quarter rose 18 percent to $2.28 billion. The company's newly acquired dealerships in Brazil chipped in about 10 percent of the company's revenue during the quarter, or $221.6 million.

For the year, Group 1 said net income rose 14 percent to $114 million while total revenue surged 19 percent to $8.92 billion.

Group 1, of Houston, ranks No. 4 on the Automotive News list of the top 125 dealership groups in the United States with retail sales of 128,550 new vehicles in 2012.

You can reach Jamie LaReau at jlareau@crain.com. -- Follow Jamie on Twitter


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