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UPDATE 2-Group 1 profit up, beats Street
July 27, 2010 / 12:16 PM / 7 years ago

UPDATE 2-Group 1 profit up, beats Street

* Group 1 adjusted EPS 75 cts vs. Street view 65 cts

* Same-store sales up 25 percent (Adds quotes from CEO interview, details, byline)

By Bernie Woodall

DETROIT July 27 (Reuters) - Group 1 Automotive (GPI.N) on Tuesday posted a second-quarter profit that beat Wall Street expectations on a 28 percent increase in revenue, led by strong sales at its Toyota dealerships.

However, the No. 4 U.S. auto dealer group warned that demand would be weaker in the third quarter due to the lack of the cash-for-clunkers federal sales incentive that boosted last year’s results.

“We will continue to be aggressive,” Group 1 Chief Executive Earl Hesterberg said in an interview. “But we won’t be as powerful in the third quarter because of cash-for-clunkers.”

He said the U.S. auto industry will continue a slow and steady recovery from 2009 -- when new-vehicle sales were the lowest in decades -- as consumer confidence and home sales remain low.

Nevertheless, Hesterberg said he was “cautiously optimistic.”

“Some people got a little bit disappointed because the economic recovery kind of flattened out in the last couple of months,” he said. “To me, that was not surprising.”

The near-term outlook for auto sales shows “no real downside from here,” said Hesterberg. “We see slow and steady growth through the second half (of 2010) and certainly into next year.”

Hesterberg sees 2010 U.S. light vehicle sales near 11.5 million, close to the J.D. Power estimate of 11.7 million.

BEATS THE STREET

Group 1’s net profit in the second quarter rose 27 percent to $12.77 million, or 54 cents per share, from $10.08 million, or 43 cents per share, a year earlier.

Excluding one-time items, it earned 75 cents per share, topping what analysts polled by Thomson Reuters I/B/E/S had expected by 10 cents.

Total revenue rose to $1.42 billion from $1.11 billion a year earlier, while same-store sales at its 101 dealerships rose 25 percent.

Retail sales rose 29 percent to $786 million, far outstripping the U.S. industrywide average of a 10 percent jump in retail auto sales in the second quarter.

Sales at Group 1’s Toyota Motor Corp (7203.T) dealers rebounded from a weak first quarter when the Japanese automaker suspended sales and recalled some of its best-selling cars.

April sales were particularly strong at Group 1 Toyota dealers and were boosted by sales incentives that were historically high for the world’s No. 1 automaker, Hesterberg said.

Toyota, including its Lexus luxury and youth-oriented Scion brands, make up 35 percent of Group 1’s new-vehicle sales.

Toyota sales gained 28 percent at Group 1, compared with a U.S. increase in sales of 14 percent, a major reason for Group 1’s strong second-quarter financial results, Hesterberg said. (Reporting by Bernie Woodall; Editing by Maureen Bavdek and Steve Orlofsky)

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