The automotive retailer with 204 locations in the United States and the United Kingdom reported Wednesday (Jan. 25) that on a same-store basis, it sold 2.5% more new vehicles and 7% more used vehicles during the fourth quarter than it did a year ago, but its gross profit per retail unit was down 7.7% and 43.8%, respectively.
“We expect a gradual decline in new vehicle margins over the course of 2023 as inventory continues to recover,” Group 1 President, CEO and Director Daryl Kenningham said Wednesday during the company’s quarterly earnings call. “We do, however, expect normalized new vehicle margins to eventually settle above our pre-pandemic levels.”
On the used vehicle side, Kenningham said the decline in pricing of those vehicles has been a continuing challenge.
Industry-wide, consumers began to feel less pain when paying for a new vehicle in the fall following a years-long spike in the price of new automobiles. It was reported in October that the average price of a new vehicle had begun to dip after reaching a record level in July.
Consumers are still buying automotive parts and service as well, with Group 1 reporting a 10.5% rise in gross profit and a 0.6% lift in gross margin on a same-store, year-over-year basis.
“We foresee aftersales continuing to be a strength over the course of 2023 for Group 1,” Kenningham said during the call.
The company reported in a presentation that parts and service now accounts for 13% of its revenue and 45% of its gross profit.
It attributed the growth in this segment to the increasing complexity of vehicles — and electric vehicles in particular — which leads consumers to return to franchised dealers that have the required tools and training.
Group 1 Automotive has also benefited from its deployment of digital tools throughout its operations. The company said in the presentation that its AcceleRide digital platform delivers a higher closing rate than that seen with non-digital shoppers.
The company also offers electronic Zelle payments within an hour when purchasing used vehicles, provides seamless online payment processing and reduces its costs by having 35% of service appointments made online.
“These cost savings will be permanent as we continue to leverage technology to drive customer and employee efficiencies,” Kenningham said during the call.
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