Group 1 Automotive Inc. reported a drop in first-quarter revenue and profit as the global coronavirus pandemic derailed what had been a strong start to the year.
The Houston dealership group said Tuesday that its U.S. and U.K. markets were on track for a record first quarter before March. Instead, the company has had to slash costs amid stay-at-home orders and a subsequent lack of business, though sales were beginning to improve near the end of April.
First-quarter revenue fell 4.2 percent to $2.69 billion. Net income declined 23 percent to $29.8 million. When adjusted for one-time items, the company's profit was $30.6 million.
"Beginning in early March 2020, all three of our regions were negatively impacted by 'shelter in place' mandates in most of the cities where we operate," CEO Earl Hesterberg said in an earnings release. By mid-March, Group 1's U.K. operations were closed, save for emergency service work, and many U.S. showrooms were shuttered.
Most service operations at the company's 119 U.S. stores remained open, but business declined dramatically, Hesterberg said. As shutdowns took hold, March U.S. new- and used-vehicle sales dropped by about half across most markets. Parts and service revenues were off by about half as well.
Brazil dealerships were entirely closed for most of March, with some service shops allowed to open in April. "Since the second week of March, our focus has turned to fulfilling customer needs within local government mandates and re-sizing our business to dramatically lower activity levels," Hesterberg said.
Group 1 has made several cost-cutting moves. It has furloughed about 4,800 employees in the U.S. and some 2,800 in the U.K., and it has terminated or furloughed more than 450 staff members in Brazil. Across all three markets, it has reduced costs by as much as 50 percent in management and by more than 75 percent for advertising expenses.
As the weekly sales pace has been improving in the U.S. in April, the company said it plans to add back about 495 positions there by June.
Most of Group 1's U.S. stores are now able to offer vehicle sales by appointment or with remote delivery. The company has been offering free pickup and delivery at all U.S. stores for service work and at-home purchases. About 20 percent of its vehicle purchases are now being done via home delivery.
The company pointed to the development of its AcceleRide online retail platform over the past 18 months as being beneficial. The initiative had been implemented across all of its U.S. dealerships by the end of last year. Leads on AcceleRide were up 60 percent in April vs. January and February levels.
Group 1 shares closed Tuesday's trading up 1.3 percent to $54.43.
Sales: Total first-quarter new-vehicle sales declined 9 percent to 35,360 across the group's dealerships in the U.S., U.K. and Brazil. Retail used-vehicle sales dropped 5.3 percent to 36,790.
In the U.S. alone, new-vehicle sales fell 7.2 percent to 24,495, while retail sales of used vehicles decreased 5.6 percent to 27,668.
Same-store sales: U.S. new-vehicle sales declined 7.6 percent on a same-store basis to 24,154 in the first quarter. Same-store retail sales of used vehicles fell 5.7 percent to 27,210.
Group 1 ranks No. 4 on Automotive News' list of the top 150 dealership groups based in the U.S., with retail sales of 169,136 new vehicles in 2019.
