Group 1 Automotive(US:GPI)2020-11-04 22:02Retail Network and Sales Performance - As of September 30, 2020, the retail network consisted of 119 dealerships in the U.S., 50 in the U.K., and 17 in Brazil[111] - New and used retail unit sales in the U.S. dropped approximately 50% in March 2020 compared to the same period in 2019, but began to recover in May 2020[119] - U.K. vehicle sales were significantly impacted by a government-mandated shutdown, resulting in approximately 35% of contracted vehicle deliveries not being fulfilled by the end of March 2020[121] - In the third quarter of 2020, U.K. operations showed a significant recovery, contributing positively to quarterly financial results, with revenues and margins increasing compared to the prior year[121] - Retail new vehicles sold decreased by 5,237 units, a decrease of 11.8%, totaling 39,152 units[131] - Retail new vehicles sold decreased by 15,737 units, or 17.6%, while retail used vehicles sold decreased by 10,135 units, or 11.2%[144] - Retail new vehicles sold decreased by 5,158 units, or 15.7%, while retail used vehicles sold decreased by 4,038 units, or 12.9%[138] Financial Performance and Revenue - Total revenues for the three months ended September 30, 2020, were $3,039.6 million, a decrease of 2.5% from $3,118.3 million in the same period of 2019[129] - Total revenues for the three months ended September 30 decreased by $123.5 million, or 4.0%, to $2,973.2 million[131] - Total revenues decreased by $1,175.0 million, or 13.3%, from $8,822.6 million to $7,647.6 million[134] - Total revenues in the U.K. for the three months ended September 30, 2020 increased by $156.2 million, or 26.7%, compared to the same period in 2019[151] - Total revenues in Brazil decreased by $56.6 million, or 51.1%, for the three months ended September 30, 2020, compared to the same period in 2019[165] - Total revenues in Brazil decreased by $143.5 million, or 43.9%, for the nine months ended September 30, 2020, compared to the same period in 2019[172] Gross Profit and Margins - The gross margin for total revenues improved to 16.8% in Q3 2020, compared to 14.9% in Q3 2019[129] - Gross profit increased by $39.5 million, an 8.6% rise, reaching $500.8 million[131] - Total gross profit fell by $81.9 million, or 6.1%, from $1,335.5 million to $1,253.6 million[134] - Total gross profit in the U.K. for the three months ended September 30, 2020 increased by $22.5 million, or 34.6%, compared to the same period in 2019[152] - Total gross profit in Brazil decreased by $5.0 million, or 36.6%, for the three months ended September 30, 2020, compared to the same period in 2019[166] - Total same store gross margin increased by 130 basis points, primarily due to higher new and used vehicle retail and wholesale margins[145] Cost Management and SG&A Expenses - SG&A expenses decreased by $49.7 million, a reduction of 14.3%, totaling $298.9 million[132] - SG&A expenses decreased by $162.5 million, or 16.2%, from $1,005.9 million to $843.4 million[134] - Total same store SG&A expenses decreased by $112.4 million, or 14.0%, for the nine months ended September 30, 2020[146] - Total SG&A expenses in the U.K. decreased by $3.9 million, or 6.8%, compared to the same period in 2019, with a constant currency decrease of 12.1%[153] - SG&A expenses as a percentage of gross profit decreased from 86.5% in Q3 2019 to 60.6% in Q3 2020[153] Strategic Initiatives and Future Outlook - The company aims to expand the "Val-U-Line®" sales program to increase used retail volume by targeting a growing customer niche[114] - The company continues to evaluate strategic acquisitions and dispositions to enhance its dealership portfolio and improve profitability[117] - The company expects used vehicle and service operations to return to near prior year levels in Q4 2020, despite uncertainties in new vehicle inventory levels[124] - The long-term impact of the COVID-19 pandemic remains uncertain, particularly with new lockdowns in the U.K. affecting vehicle sales[124] Impact of COVID-19 - The impact of the COVID-19 pandemic led to significant reductions in operating capacity, with service repair orders declining by approximately 50% in late March 2020[119] - The company furloughed or terminated approximately 8,000 employees in early April 2020, but U.S. and U.K. headcounts have since returned to about 75% of pre-COVID levels[123] - The company implemented cost reduction strategies to mitigate the negative impact of lower gross profit, including $1.2 million in severance costs due to redundancy[160] - The government mandated closure of all U.K. dealerships from March 21, 2020, to June 1, 2020, significantly impacting operations[157] Cash Flow and Liquidity - The company generated $712.7 million of net cash flows from operating activities for the nine months ended September 30, 2020, compared to $310.8 million for the same period in 2019, representing a 129.3% increase[195] - As of September 30, 2020, the company had total cash liquidity of $192.9 million and an additional $273.1 million of borrowing capacity on its Acquisition Line, bringing total immediate liquidity to $466.0 million[213] - The company announced a $200 million share repurchase program on October 6, 2020, indicating sufficient liquidity and no anticipated material liquidity constraints[123] Interest Expense and Tax Provision - Floorplan interest expense decreased by 47.1% for the three months ended September 30, 2020, compared to the same period in 2019[182] - Provision for income taxes increased by $23.6 million to $34.6 million for the three months ended September 30, 2020, and by $17.4 million to $55.8 million for the nine months ended September 30, 2020, primarily due to increases in pretax book income[186] - The effective tax rate decreased to 21.5% for the three months ended September 30, 2020, from 22.3% in the same period in 2019, and to 23.1% from 23.4% for the nine months ended September 30, 2020[186]