Strong used-vehicle sales and a growing parts-and-service business helped lead Group 1 Automotive Inc. to record profit in the first quarter despite a dip in revenue as new-vehicle sales tumbled.
The Houston retailer, the fourth-largest dealership group in the country, reported Thursday that net income grew 7.9 percent to $38.6 million in the quarter, while revenue slid 1.8 percent to $2.81 billion. Group 1 said it sold more used vehicles than new ones in the U.S. for the first time ever.
Group 1's parts-and-service unit, which it calls aftersales, had a solid quarter, with gross profit up 6.2 percent on revenue that grew 5.6 percent.
"The strategic emphasis we have placed on our used vehicle and aftersales business was obvious in our financial results this quarter," CEO Earl Hesterberg said in a statement. He called the parts-and-service growth "especially remarkable" and said it reflected a variety of actions taken over the last year. "This performance clearly demonstrates our ability to grow earnings in a soft new vehicle sales market."
On an adjusted basis, net income rose 6.6 percent to $38.2 million and excluded an after-tax gain of about $500,000. That gain was composed of $3.8 million in net after-tax income related to dealership and real estate dispositions that was partially offset by $1.9 million in after-tax losses related to undisclosed legal matters, as well as by $1.5 million in after-tax losses related to hailstorms, the company said.
Group 1's gross profit rose 2.8 percent to $431.5 million.
The retailer's shares rose 2.2 percent to close at $76.31 on Thursday.
Records: First-quarter net income rose 7.9 percent to $38.6 million
Sales: Total new-vehicle sales fell 5.6 percent to 38,874 vehicles across the group's dealerships in the U.S., U.K. and Brazil. Used-vehicle retail sales rose 7.2 percent to 38,836 vehicles.
Same-store sales: In the U.S., same-store new-vehicle sales dropped 8.7 percent to 25,569 vehicles. That compares with an industrywide drop of 3.2 percent in new light-vehicle sales during the first quarter, according to the Automotive News Data Center. Across all markets, Group 1's same-store new-vehicle sales fell 7.8 percent to 36,634 vehicles. U.S. same-store used-vehicle sales rose 6.6 percent to 28,389. That was 2,820 more than same-store retail new vehicles sold, marking the first time used outsold new in the company's 22-year history. Across all markets, the company's used-vehicle sales rose 4.6 percent to 36,671.
International operations: Same-store retail sales of new vehicles dropped 10 percent to 1,850 vehicles in Brazil and 4.6 percent to 9,215 vehicles in the U.K.
Group 1 ranks No. 4 on Automotive News' list of the top 150 dealership groups based in the U.S., with retail sales of 170,517 new vehicles in 2018.