Group 1's Q2 revenue hits record; net income up 31%
Group 1 Automotive Inc.'s total revenue jumped 27 percent to a quarterly record $2.34 billion in the second quarter compared with the year-earlier period, led by a 27 percent increase in new-vehicle revenue, the company said today.
Net income surged 31 percent to $37.4 million.
New-vehicle retail sales revenue was $1.38 billion, as the group's retail new-vehicle sales increased 6 percent to 32,589 units, less than the industrywide 9 percent increase in new-light-vehicle sales in the quarter.
Group 1 CEO Earl Hesterberg said in a conference call today that Group 1 did not meet the industry average partially because of low sales in the Northeastern region of the United States.
The Eastern region accounted for 26 percent of the group's new-vehicle sales, while the West accounted for 52 percent.
"As these record results demonstrate, we are beginning to reap the benefits of the significant process improvements and growth investments we have made since the recession," Hesterberg said in a statement.
Revenue grew at a double-digit pace from all operations segments: used-vehicle retail sales, used-vehicle wholesales, sales, parts and service, and finance and insurance.
Revenue from used vehicle sales rose 17 percent from the year-earlier period to $534.8 million.
Revenue from finance and insurance rose 22 percent to $79.8 million and parts and service revenue increased 18 percent to $261.0 million.
Customer-pay, or nonwarranty work, business in all markets accounted for 49 percent of the total parts and service revenue.
"The customer-pay business is what we put all our effort into," Hesterberg said during the call. "We have been investing in our parts and service since before the recession."
Hesterberg said that about 90 percent of its stores now use an inbound call center, which he thinks is a "critical part" of how Group 1 is going to do business.
On a same-store basis, new vehicle sales rose 5 percent to 33,345 units, and total revenue rose 7 percent to $1.96 billion.
Group 1 owns 139 dealerships, 178 franchises and 35 collision centers in the United States, United Kingdom and Brazil.
After entering the Brazil market by purchasing 18 dealerships in January, new vehicle sales in Brazil accounted for 13 percent of Group 1's total vehicle sales and 11 percent of total revenues.
Group 1 also acquired four dealerships in the U.K. in the first quarter, and stores in the U.K. accounted for 9 percent of new-vehicle unit sales.
Group 1's new Brazil and U.K. dealerships added an estimated $827 million in annual revenue, Automotive News reported.
In June, the group sold four dealerships that generated $176.7 million in revenue during the past 12 months, and it posted a one-time pretax gain of $8.3 million for the transaction during the second quarter.
The group also secured a revolving credit last month to give it more capital for additional acquisitions during the next five years.
The company is also selling off stores that aren't generating enough profits.
"In addition to our ongoing corporate growth efforts via acquisitions, we have continued to rebalance our U.S. dealership portfolio with the disposition of operations not generating an acceptable level of return for our shareholders," Hesterberg said in a statement.
"Five of these dealership dispositions have occurred in California. Following the two dispositions made earlier this week, we expect no additional near-term disposals in the California market as our remaining seven dealerships are expected to generate positive shareholder returns."
Hesterberg said Group 1 does not have any acquisitions lined up in the near future, but the group is not opposed to the idea.
"The U.S. presents the best opportunity for us, primarily because we have the best experience in this market," Hesterberg said.
Hail storms in late April damaged inventory at Group 1's Oklahoma City, Okla., dealerships and several Houston locations. Hesterberg said it took a month to replenish new-vehicle inventory and about two weeks to replace used vehicles.
But, with new-vehicle sales, Oklahoma still accounted for 8 percent of total sales, and Texas dealerships sold 31 percent of Group 1's vehicles, the most of any state.
Group 1, of Houston, ranks No. 4 on Automotive News' list of the top 125 U.S. dealership groups, with 2012 retail sales of 128,550 new vehicles.
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