UK fuels Group 1’s Q3 international performance

HOUSTON - 

While Group 1 Automotive watched some rebounding happen in Texas, the dealer group also cheered what’s occurring on its international fronts, especially in the United Kingdom.

As the nation’s new-vehicle sales declined nearly 9 percent as a whole during the third quarter, Group 1 posted a 2.9-percent sales increase on a same-store basis.

Also of note, Group 1 watched its total used-vehicle gross profit rise by 22.2 percent.

Furthermore, Group 1’s operations in the U.K. generated a 10.6-percent increase in aftersales gross profit along with a 9.8-percent lift in F&I gross profit.

“We are in an emerging company in the U.K., and we are quite a strong emerging company,” Group 1 president and chief executive officer Earl Hesterberg said during the company’s latest conference call. “We have a pretty good brand mix. The power in the third quarter came from our Audi business and our Ford business. And we are now broadening our brand exposure a bit. The most recent acquisition has put us into the Volkswagen network, the Toyota network, and we’re becoming reasonably significant Jaguar-Land Rover dealerships.

“So we are getting some scale now. We have some power. And this always has been a good business for us,” Hesterberg continued. “But over the last two years, we have made two acquisitions of about a dozen stores each. So, now, we’ve got some muscle, and we’ve got a very capable team. And I think that’s how we’re able to outperform the market.

All told, Group 1 has 3,000 employees, 43 dealerships and $2 billion per year in annual revenues germinating out of the U.K.

“I have been able to spend a lot of time over there. It’s not a small business anymore. And I think we can continue to outperform the market there,” Hesterberg said. “We have some stores that don’t perform well and we’ve got to improve those or get rid of them. I think that U.K. is a very positive story for Group 1 and I don’t think it’s a one-quarter phenomenon.”

Down in Brazil, Group 1 calculated that its South American operations accounted for 4.0 percent of total revenues and 3.3 percent of total gross profit.

The company reported that total same-store revenue grew 14.0 percent and total same-store gross profit increased 22.4 percent, reflecting strong growth in same-store total used-vehicle gross profit of 27.7 percent and a 30.9-percent rise in same-store aftersales gross profit.

In addition, Group 1’s Brazilian same-store F&I gross profit per unit jumped 30.6 percent.

“Through the economic downturn in Brazil, which is what probably has been since the first day we went there, we have downsized that business to get the weak parts and the bad parts out. And we know have a very strong core of business,” Hesterberg said. “We’re the largest Honda retailer in the country, good Toyota business and I think we are the second largest Land Rover and BMW group in Brazil. We have 16 dealerships. We also have Mercedes dealership there I should mention.

“We would benefit significantly from more scale there. We have an incredible management team there that we have developed, good local team, and we’ve got great brand mix, but we could use some more muscle amount, some more scale,” Hesterberg went on to say. “I’m going to work on that.”

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