Tags: GPI | AN | SAH | retail

Group 1 Automotive Turns the Corner

By Mike Seemuth   |   Friday, 09 Sep 2011 02:32 PM

Group 1 Automotive (GPI) has steered its family of auto dealerships in the right direction, driving increased sales and profits from vehicle retailing and related businesses.

The Houston, Texas company earned net income of $40 million in the first six months of the year, nearly double its bottom line in the same period last year.

Revenue in the January to June period rose about 10 percent, year over year, to $2.88 billion. The company owns and operates 105 auto dealerships across the United States and in the United Kingdom.

Group 1, organized in 1995, operates in major metropolitan areas of 15 states including California, Florida, New York, and Texas in such UK metro markets as Brighton and Farnborough.

Ancillary businesses in addition to vehicle retailing include sales of vehicle parts, repairs, maintenance, financing and insurance. Competitors of Group 1 include auto dealership groups AutoNation (AN) in Fort Lauderdale, Fla., and Sonic Automotive (SAH) in Charlotte, N.C.

Auto dealerships that have been part of Group 1 since the beginning of 2010 recorded 7.1 percent growth in gross profit on a 9.1 percent increase in revenues during the January to June period, compared to the same six month stretch last year.

Annual revenue has been approaching the pre-recession peak. The top-line total last year was $5.5 billion, up sharply from 2009 but still about $750 million less than 2007. Net income rose to $50 million last year from $35 million in 2009 following a net loss of $48 million in 2008.

Growth via acquisition

Acquisitions have built the company. In the first six months of the year, for example, Group 1 acquired seven franchises to sell new vehicles that together will add an estimated $340 million to the company's annual revenue.

Credit rating agency Standard & Poor's reported in June that it expects Group 1 to "fund its acquisition activity using a combination of free cash flow and mortgage financing" and to "maintain balance sheet discipline." Nancy C. Messer was the primary credit analyst on the S&P report.

Wall Street is generally content with the direction that Group 1 is taking. Most analysts who were following the company in early September recommended buying or at least holding its stock.

Group 1 is scheduled to report third-quarter results on Oct. 27.

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Group 1 Automotive (GPI) has steered its family of auto dealerships in the right direction, driving increased sales and profits from vehicle retailing and related businesses. The Houston, Texas company earned net income of $40 million in the first six months of the year,...
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