Group 1 Automotive is the third largest of a group of new and used car retailers (behind #1
Penske Automotive Group)
striving to consolidate US auto sales. The company owns 162 dealerships, 212 franchises, and about 37 collision service centers, , operating under their own branding, in the US, UK and Brazil. The US is the biggest market, and the company is present in 14 US states. Group 1 sells 34 car and light truck brands, of which Toyota, BMW and Ford are the biggest sellers. It also offers financing, provides maintenance and repair services, and sells replacement parts.
Group 1 Automotive's operations include five core business segments: New Vehicles (56% of sales), Used Vehicles (25%), Parts & Service (11%), Used Vehicles wholesale (4%), and Finance & Insurance. In the UK the auto dealer operates through its subsidiary Group 1 Automotive UK Ltd.
More than half of Group 1's dealerships are located in Texas, Oklahoma, and California. In the UK, Group 1 Automotive also has 25 franchises, about 17 dealerships and six collision centers; and in Brazil, 23 franchises, about 19 dealerships and one collision center.
The auto dealer rings up about 84% of its sales in the US, the largest segment; the remainder comes from the UK (11%) and Brazil (5%).
The company's US operations are located primarily major metropolitan areas. It is present in 15 towns and cities in the UK, and has a presence in Brazil in key metropolitan areas in the states of Sao Paulo, Parana and Mato Grosso do Sul.
Sales and Marketing
Group 1 recorded advertising expenses of 74.6 million, $73.8 million, and $59.0 million in 2015, 2014, and 2013 respectively.
Group 1 has recorded strong revenue growth in the past five years. In 2015 it grew 7% to $10.6 billion, on the back of growth in all segments. Revenue in new and used vehicle sales was up due to better industry conditions in both the US and the UK, although segment growth was partially offset by sharp declines in Brazil of 19.2% and 29.7% in new and used sales. Dealership acquisition activity was also a driving force behind revenue growth.
Net income nudged up a modest 1% in 2015 to $94.0 million. The company's frequent acquisitions are a factor in net income lagging behind its consistent revenue growth. The removal of a long-term debt from the books in 2014 helped improve net income, as well as the revenue growth.
Cash from operating activities of $141.0 million in 2015 was 29% lower than prior year, due to changes in inventories and accounts and notes receivable.
About 69% of Group 1's 2015 new vehicle sales came from Toyota, Honda, Ford, BMW, and Nissan. Sales of new vehicles bearing Toyota/Scion/Lexus nameplates accounted for more than a quarter of new vehicle unit sales in 2015.
Like its rival AutoNation, Group 1 Automotive is focusing on growing market share through acquisitions of import and luxury brand dealerships. The Houston-based auto dealer is also expanding internationally, both in the UK (where it already has an established presence) and in Brazil, a relatively new market for the company. Those countries accounted for 16% of sales in 2015. The company's strategy also includes growing its higher margin parts and services business, growing its share of the new and used vehicle market, taking advantage of its size to boost efficiency, and continuing to make strategic acquisitions. In recent years Group 1 has seen import and luxury brands account for an increased share of its business.
The company routinely disposes of insufficiently profitable dealerships; in 2015 it disposed of two dealerships and one franchise in the US, and two franchises in Brazil. The disposals brought in a net $115.0 million.
Mergers and Acquisitions
In 2016, Group 1 acquired London-based Spire Automotive Group's twelve dealerships, including four Audi dealerships and three BMW/MINI dealerships, which will continue to use the Spire brand name. The acquired dealerships are expected to bring in approximately $575 million per year. The acquisition could also further Group 1's relationships with BMW and the Volkswagen Group in the UK.
Group 1's acquisition activity in 2015 included Audi and Mercedes-Benz dealerships in Texas, as well as one of the nation's top Audi dealerships, Prestige Audi in North Miami Beach.