Group 1 Automotive Q4 Earnings Call Highlights

Core Insights - Group 1 Automotive reported strong fourth-quarter performance with record revenue and gross profits, despite a decline in new vehicle sales and increasing consumer concerns about affordability [1][4][3] Financial Performance - Fourth-quarter 2025 revenue reached $5.6 billion with a gross profit of $874 million, and adjusted net income from continuing operations was $105 million, resulting in an adjusted diluted EPS of $8.49 [2] - For the full year, the company achieved a gross profit exceeding $3.6 billion, including nearly $1.6 billion from parts and service, and sold a record 459,000 vehicles [3][7] Business Segments - The company experienced record gross profits in parts and service and finance and insurance (F&I), showcasing the strength of its diversified business model [3][4] - Used vehicle operations maintained flat volumes year-over-year, with revenues increasing by approximately 4% as reported and 1% on a same-store basis, although same-store used vehicle gross profit per unit declined by about 8% [7][8] Cost Management and Efficiency - Adjusted SG&A as a percentage of gross profit rose by 200 basis points sequentially to 67.8%, primarily due to higher employee expenses, with a focus on resource management and technology investments [9] - The company is deploying AI and virtual F&I tools to enhance technician and F&I productivity [5][20] U.K. Operations and Restructuring - In the U.K., the company cut 537 roles and completed systems integrations while pursuing further portfolio actions, including a potential exit from the JLR brand [6][11] - Same-store new vehicle volumes in the U.K. declined by 8.2%, while used vehicle same-store revenue rose over 9% in local currency [13][14] Capital Allocation and Shareholder Returns - Group 1 repurchased $555 million of stock in 2025 and paid $26 million in dividends, with an additional $28.3 million in stock repurchases post-quarter [19] - The company disposed of 13 dealerships generating about $775 million in annualized revenue, primarily driven by underperforming U.K. stores [17] Future Outlook - Management remains focused on organic growth opportunities, particularly in the U.K., and anticipates increased lease returns as a source of premium used supply later in the year [22][23]