Group 1 Automotive improves first-quarter revenue as net income drops

Group 1 Automotive Inc.’s net income plunged 22 percent for the first quarter even as acquisitions, service business growth and elevated vehicle pricing pushed the dealership group’s revenue to a new quarterly record.

Net income for the quarter was $158.4 million, Group 1 reported Wednesday. Revenue increased 7.4 percent to $4.13 billion.

Group 1, of Houston, retailed more new and used vehicles in the quarter, but per-vehicle gross profits for both dropped by double-digit percentages.

Net income dropped because new-vehicle supply “has loosened” and gross profits are coming down as a result, CEO Daryl Kenningham told Automotive News after first-quarter results were released. In other words, while new-vehicle inventory levels are still historically low for the industry and prices still elevated, the market is starting to normalize from the extremes experienced the past few years.

“We all knew it was going to happen,” Kenningham said. “The question was when and to what degree. It has been a gradual decline — about what we expected, and so that was not a surprise.”

Group 1 noted a 14 percent rise in parts-and-service gross profits, and Kenningham said the retailer’s ongoing investments in technician hiring and technology innovation helped.

“We continue to invest in after-sales and believe parts and service will be a strength through the rest of 2023,” he said. “We retain two-thirds of our customers, [and] we feel like we can do a better job of retaining more of them. When you consider the amount of work that our customers still elect to defer, that’s an opportunity.”

Group 1 reported several actions related to its dealership network. In March, it acquired Estero Bay Chevrolet in Florida, which is expected to add $150 million in annual revenue to the company.

It also sold a dealership in New Jersey in March and another in New York in April. In March, Group 1 said it ended a dealership franchise in New Mexico. Combined, those three entities had produced $50 million in annual revenue.

Group 1 reported a U.S. new-vehicle supply of 27 days at the end of March vs. 21 days as of Dec. 31 and nine days at the end of March 2022. U.S. used-vehicle supply was at 25 days at the end of March vs. 28 at the end of December and 28 at the end of 2022’s first quarter.

The group repurchased just less than 181,000 shares in the first quarter, continuing a buyback program that has encompassed roughly 4.2 million shares over 18 months at a cost of $747.9 million.

Shares of Group 1 closed at $221.13, up 0.4 percent.

Q1 net income: $158.4 million, down 22 percent from a year earlier

Q1 revenue: $4.13 billion, up 7.4 percent

Q1 adjusted net income from continuing operations: $156.1 million, down 15 percent

Vehicle sales: 39,649 new vehicles total, up 7.9 percent; 30,883 new vehicles in the U.S., up 4.7 percent; 45,437 used vehicles total, up 3.7 percent; 34,440 used vehicles in the U.S., up 1.5 percent

Ranking: Group 1 ranks No. 4 on Automotive News‘ list of the top 150 dealership groups based in the U.S., with retail sales of 154,714 new vehicles in 2022.