Group 1 Automotive Inc.’s fourth-quarter revenue held nearly flat against a post-hurricane surge in demand a year earlier, while net income dropped sharply in comparison to the fourth quarter of 2017, when the retailer benefited from a one-time tax break.
In the fourth quarter of 2017, U.S. corporate tax cuts inflated Group 1’s net income by about $73 million to $110.5 million. In the fourth quarter of 2018, net income tumbled to $30.7 million, down 72 percent — or $79.8 million — in comparison. Adjusted net income fell 1.1 percent to $43.8 million, the company said Tuesday. That adjusted number excluded a $13.1 million net after-tax adjustment related primarily to annual intangible asset testing.
Fourth-quarter revenue for the Houston dealership group, which has stores in the U.S., U.K. and Brazil, was stable at $2.9 billion.
Group 1 also cited challenging new-vehicle sales comparisons vs. the fourth quarter of 2017, when post-Hurricane Harvey demand in its major Houston and Beaumont, Texas, markets bolstered sales. In the fourth quarter of 2018, new-vehicle sales in the Houston and Beaumont markets, which make up about 26 percent of the company’s new-vehicle sales, declined 16 percent compared with the year earlier.
“We faced difficult new-vehicle sales comparisons due to unprecedented replacement demand following Hurricane Harvey last year, as well as new-vehicle supply shortages this year in the U.K. caused by Worldwide Harmonised Light Vehicle Test Procedure (“WLTP”) legislation,” CEO Earl Hesterberg said in a statement. “Our strong performance in used vehicles, parts and service, and F&I allowed us to deliver positive same-store gross profit growth despite these very significant headwinds in our new-vehicle business.”
Sales: Total retail new-vehicle sales fell 5.5 percent to 42,272 across the group’s dealerships in the U.S., U.K. and Brazil. Total retail used-vehicle sales rose 13 percent to 36,099 vehicles.
Same-store sales: Same-store retail sales of new vehicles across all Group 1 stores dropped 8.6 percent to 40,358 units. Same-store retail new-vehicle sales in the U.S. declined 6.9 percent to 30,835 units. That compared with a 1 percent drop in U.S. light-vehicle sales across the industry in the fourth quarter, according to the Automotive News Data Center. Same-store retail used-vehicle sales in the U.S. rose 11 percent to 27,097 units.
Records: Same-store finance-and-insurance gross profit in the U.S. rose 4.1 percent to reach an all-time record high of $1,767 per vehicle.
International operations: Same-store retail sales of new vehicles in Brazil fell 4.3 percent to 2,253 units. At Group 1’s U.K. stores, same-store retail new-vehicle sales dropped 16 percent to 7,270.