Group 1's Q3 net falls 22% on soft energy, UK markets
Group 1 Automotive Inc.’s net income fell 22 percent in the third quarter to $35.4 million, hurt by sales weakness in energy-dependent markets and soft sales in the U.K. following the Brexit vote to leave the European Union, the company said today.
“While our U.K. sales decreased in July and August, we did see recovery in September, but not enough to offset the weakness that occurred immediately following the vote,” CEO Earl J. Hesterberg said in a statement.
Total revenue edged up 0.8 percent to a third-quarter record of $2.82 billion, while gross profit rose 2.1 percent to $406.7 million.
Net also was hurt by aftertax charges of $6.7 million for a non-cash asset impairment charge, $281,000 for catastrophic losses, primarily storm damage, and $274,000 for foreign transaction tax expenses. Those were offset by $700,000 net gains from the sale of dealerships.
Wells Fargo Securities said in a research note that it expected pressure on Group 1 shares today after the company missed the analyst consensus on earnings per share. The auto group reported third quarter earnings per share from continuing operations of $1.96 compared to the consensus of $2.10.
As predicted, the report sent Group 1 shares tumbling 6.2 percent to close at $59.15.
Revenue from new-vehicle sales slipped 0.8 percent to $1.59 billion on a 3.2 percent drop in unit sales, but revenue from all other operations rose. Revenue from used-vehicle retail sales rose 2.2 percent to $702.6 million on 1.6 percent higher unit sales. Revenue from parts and service climbed 5.3 percent to $319.7 million.
On a same-store basis, U.S. new-vehicle sales fell 7.9 percent to 34,435 units. In contrast, industrywide sales slid 1.3 percent in the quarter.
During the third quarter, Group 1 sold Hyundai of Escondido, Calif., and Ira Porsche, of Danvers, Mass. In October, the company also sold Honda of Van Nuys, Calif. In total, those dealerships generated about $120 million trailing twelve-month revenue.
In addition, Group 1 was awarded a Porsche open point in El Paso, Texas, during the third quarter, with the store’s opening targeted for late 2017.
In October, the company acquired two U.K. dealerships: Ford Basingstoke and Ford Newbury. They are expected to generate about $65 million in annualized revenues.
Gross profit fell 0.5 percent in the company’s U.S. operations to $346.7 million, rose 31 percent in the U.K. operations to $47.5 million, and dropped 9.8 percent in its Brazilian operations to $12.5 million.
Group 1 Automotive, of Houston, ranks No. 3 on Automotive News’ list of the 150 largest dealership groups based in the U.S., with retail new-vehicle sales of 174,614 in 2015.
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