Group 1 Automotive Inc. said Thursday that revenue rose to record levels in the fourth quarter, even as the dealership group navigated operational challenges brought on by the pandemic and inventory constraints.
The public retailer based in Houston saw revenue in the quarter rise 19 percent to $3.49 billion, helped by strong consumer demand for vehicles and by its parts and service business. The company’s net income fell 13 percent for the quarter to $87.1 million, though that figure includes a net loss from operations in Brazil. Group 1 plans to divest the Brazilian operations in the second quarter of this year, and the unit is now reported as discontinued operations.
Net income from continuing operations, which includes Group 1’s U.S. and United Kingdom operations, rose 65 percent to $163.2 million in the quarter.
The dealership group’s new-vehicle retail sales slipped 3.5 percent amid a global shortage of microchips that has slowed production of new models. Group 1 had just a nine-day supply of new vehicles in the U.S. as of Dec. 31, compared with a 48-day supply as of Dec. 31, 2020. Supply of used vehicles in the U.S. was up slightly year over year, to 36 days at year end.
“2021 was another record year for Group 1 Automotive, driven by strong vehicle sales demand; strong margins due to vehicle supply constraints; double-digit growth in aftersales, as miles driven have recovered; and continued strong expense control, as we benefit from process and personnel efficiencies realized during the pandemic,” Group 1 CEO Earl Hesterberg told analysts Thursday on the company’s fourth-quarter earnings call.
Group 1 said it acquired three dealerships in October — two in Texas and one in California — that the company says should generate roughly $235 million in annualized revenue. But most of the retailer’s expansion last year stemmed from its November purchase of nearly all of the assets of Prime Automotive Group, including 28 dealerships representing 41 franchises, plus three collision centers. Group 1 described the Prime purchase as its largest-ever acquisition.
Group 1 said the Prime stores are expected to produce $1.8 billion in annual revenue, making up the bulk of an anticipated $2.5 billion in acquired annual revenue in 2021. The retailer said it also disposed of dealerships representing six franchises last year, resulting in a net $2.3 billion of expected acquired annual revenue. The acquisitions bring Group 1’s global dealership count to 202 stores, excluding Brazil.
The retailer plans to sell its operations in Brazil, with the transaction expected to close in the second quarter, Hesterberg said. Group 1 said it expects to take a noncash charge of $77.5 million on the sale, related to exchange rate translation adjustments.
For the full year, Group 1 reported higher revenue and a near doubling of net income.
Shares of Group 1 traded down 5.4 percent to close at $166.32 Thursday.
• Q4 revenue: $3.49 billion, up 19 percent from a year earlier
• Q4 net income: $87.1 million, down 13 percent from a year earlier
• Q4 adjusted net income from continuing operations: $169.9 million, up 65 percent from a year earlier
• Q4 new-vehicle sales: 35,573, down 3.5 percent from a year earlier
• Records: Fourth-quarter revenue; adjusted fourth-quarter earnings per share from continuing operations
• 2021 revenue: $13.48 billion, up 27 percent
• 2021 net income: $552.1 million, up 93 percent
• 2021 adjusted net income from continuing operations: $633.7 million, up 90 percent from 2020
• 2021 new-vehicle sales: 146,072 vehicles, up 8.4 percent
• Ranking: Group 1 ranked No. 4 on Automotive News‘ most recent list of the top 150 dealership groups based in the U.S., with retail sales of 140,221 new vehicles in 2020.
