Group 1 is based in Houston, which was flooded for several days. Photo credit: Christian Tycksen via Reuters
Despite being battered by Hurricane Harvey, Group 1 Automotive Inc. turned in strong operational results in the third quarter. In the U.S., it posted higher gross profit in new- and used-vehicle sales and parts and service, while its overseas operations turned in a particularly strong quarter, the company said Thursday.
Group 1 shares jumped on the news — rising 11.7 percent to close the day at $ 78.73.
The auto retailer’s net income fell 16 percent from the year earlier to $ 29.9 million because of business interruptions and additional costs resulting from Hurricane Harvey. Adjusted net income, which strips out costs primarily related to the storm, rose 11 percent to $ 46.6 million.
Total revenue in the dealership group’s markets — U.S., U.K. and Brazil — rose 6.7 percent to a record for the quarter of $ 3.01 billion on replacement demand in September. The group’s U.S. operations made up 76 percent of total revenue and 82 percent of total gross profit.
“While the company’s third quarter results were negatively affected by both the non-recurring costs from Hurricane Harvey, as well as business disruption for more than a week across our largest revenue-generating market, strong demand for replacement vehicles in September provided significant financial recovery,” CEO Earl Hesterberg said in a statement. “We expect this recovery to continue for a number of months, as the region continues to rebuild from Hurricane Harvey’s widespread impact.”
Group 1’s Houston headquarters and all of its 28 dealerships in the area closed in late August in Harvey’s wake. While one of its stores near a bayou in Clear Lake lost some inventory, most vehicles at Group 1 dealerships remained intact, Pete DeLongchamps, vice president of manufacturer relations, financial services and public affairs, told Automotive News in August.
The drop in net income was partially due to Group 1 taking about a $ 9 million aftertax hit from the hurricane and a $ 5.9 million aftertax hit due to franchise right impairments.
Despite the hurricane, strength in new-vehicle sales and aftersales, or parts and service, in the U.S., the used-vehicle business in the U.K. and double-digit growth in used, aftersales and finance and insurance in Brazil were “positive factors” last quarter, Hesterberg said.
In the U.S., Group 1 retailed 35,233 new vehicles, up 1.5 percent from a year earlier.
On a same-store basis, Group 1’s U.S. retail new-vehicle sales rose 2.5 percent to 34,917, substantially better than the 1 percent drop in industrywide light-vehicle sales in the quarter, while gross profit per unit retailed rose 4.7 percent to $ 1,882. Used-vehicle sales slipped 2.6 percent to 26,093.
While the overall U.K. new-vehicle market slid about 9 percent, Group 1’s same-store new-vehicle retail sales there grew 2.9 percent.
Vince Bond Jr. contributed to this report.