Group 1 reports fewer car purchases in Houston and other parts of the struggling oil patch
Group 1 Automotive reported lower second-quarter earnings Thursday, again citing steep declines in Houston and other energy-centric markets despite the region’s stop-and-go recovery from the oil bust.
The Houston-based Fortune 500 auto retailer reported a $39.1 million profit, 16 percent less than the $46.6 million it earned during the same quarter last year. Most of the declines occurred in Texas and Oklahoma, where vehicle sales fell 7 percent.
In Houston, the company outperformed other auto dealers, which collectively reported a 24 percent decline in sales last month. Group 1’s local sales fell only 12 percent during the same period, but the company expects the slump to continue.
“Our single largest market of Houston was extremely volatile,” president and CEO Earl Hesterberg said in a statement. “This is indicative of the headwinds we continue to face in much of Texas and Oklahoma.”
The company’s results mirror a nationwide trend. Auto sales fell nearly 3 percent in June, the sixth consecutive monthly decline.
Auto sales in Houston have been sluggish for months following a recordsetting 2015. Retail sales in the region totaled about 17,690 vehicles last month,
down 24.3 percent from the same period a year earlier, according to data from the TexAuto Facts Report, published by Sugar Landbased InfoNation.
That total fell more than 22 percent May, when sales reached the highest level since August.
The overall declines ate into Group 1 revenue, which fell 4 percent to $2.7 billion during the quarter. Same-store sales decreased 2.7 percent across the nation.
Group 1 operates 173 automotive dealerships, 227 franchises and 47 collision centers in the U.S., the United Kingdom and Brazil.
Its U.S. operations account for about 80 percent of its revenue.
In a research note, Consumer Edge Research analyst Jamie Albertine wrote that Group 1 managed well through a “particularly difficult” time. He noted that the steep declines in Texas and Oklahoma might have come as a surprise to those expecting a faster recovery in those markets this year.
“We continue to view (company) management as one of the best in the sector,” he wrote.
CFRA Research analyst Efraim Levy lowered the firm’s expectations for Group 1’s earnings this year amid broader challenges in the auto sector. He noted that Group 1 faced particular pressure in oil-centric markets as well as the U.K.
In the U.K., which accounts for about 16 percent of Group 1’s revenue, new vehicle sales declined by about 1.4 percent.
The company recently acquired British auto retailer Beadles Group, which operates 12 dealerships in the greater London area.