International multi-brand Fortune 500 automotive retailer Group 1 Automotive Inc. (GPI:NYSE) today reported "preliminary estimates of its earnings and unit sales for the three months ended June 30, 2021."
Group 1 Automotive's CEO Earl Hesterberg commented, "The unprecedented supply disruption to new vehicle production largely stemming from the microprocessor shortage has made it very difficult for the financial markets to grasp the impact on our business. Therefore, we are providing some preliminary data on how we are navigating through these challenging times – and I think it is fair to say we are navigating the situation quite well."
The company stated that is expects that for Q2/21 both GAAP and non-GAAP earnings will come in between $10.20 and $10.70 per share. The firm noted that the anticipated results are due to several factors including strong margins on U.S. vehicle sales, a rebound in the automotive service business in the U.S., overall recovery in the market in the U.K. and from continuing cost control measures implemented companywide.
Group 1 advised that it expects Q2/21 same-store parts and service gross profit in the U.S. will increase by about 10% compared to results posted during Q2/19. The company noted that making specific comparisons versus Q2/20 would not be relevant or useful and would be greatly distorted due to the significant and substantial COVID-related business disruptions it experienced in Q2/20.
The company's President of U.S and Brazilian Operations Daryl Kenningham remarked, "As evidenced by U.S. new vehicle industry sales volumes in recent months, the prolonged reduced level of vehicle production by our OEM suppliers has hampered industry sales volumes and our new-vehicle inventory levels by significant amounts compared with normal expectations. However, it should be noted that industry sales volume reflects a dramatic decrease in the fleet segment in the U.S., a market that Group 1 does not actively compete in. Additionally, OEMs are now producing only the fastest selling models, which improved our inventory turn and enabled us to sell more new units in the U.S. in the second quarter of 2021 than we did in the second quarter of 2019, which was the comparable period pre-COVID."
Group 1 provided estimates for Q2/21 same-store unit sales noted that companywide on a consolidated basis it expects unit sales of 42,600 new vehicles and 45,000 used vehicles, which represents a 1% decrease in new sales and a 12% increase in pre-owned sales, compared to Q2/19 results.
The U.S. segment showed the highest growth in new retail units to 34,000 expected for Q2/21, representing an 11% increase from Q2/19. The U.K. segment showed the highest growth in used retail units to 10,500 expected for Q2/21, representing an 21% increase over Q2/19.
The firm indicated that at the end of Q2/21, its new vehicle inventories in the U.S. totaled around 5,400 units, which represents about a 16-day supply and used vehicle inventories were approximately 12,800 units equating to about a 29-day supply.
CEO Hesterberg commented specifically on the inventory levels stating "We believe that we are nearing our lowest point of new vehicle supply with approximately 8,500 new U.S. vehicle receipts in June 2021 and a similar number expected in July. We do not have visibility beyond that. A high percentage of our incoming units are pre-sold and we were able to retail approximately 10,000 units in June in the U.S. despite inventory levels never exceeding 7,000 units at any point during the month."
The company advised that it plans to release its full earnings for the second quarter ended June 30, 2021 on July 29, 2021.
Group 1 Automotive is headquartered in Houston, Tex., and stated that "it owns and operates 188 automotive dealerships, 242 franchises, and 48 collision centers in the U.S., the U.K. and Brazil that offer 32 brands of automobiles." The firm sells both new and used cars and light trucks through its many dealerships. In addition, the company offers related dealer services including vehicle financing, vehicle parts sales, service contracts and maintenance and repair services.
Group 1 Automotive began the day with a market cap of around $2.7 billion with approximately 18.2 million shares outstanding and a short interest of about 11.2%. GPI shares opened slightly lower today at $149.56 (-$0.76, -0.51%) from yesterday's $150.32 closing price and then turned higher. The stock has traded today between $146.77 and $165.55 per share and is currently trading at $162.53 (+$12.21, +8.12%).
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