Group 1 Automotive NYSE: GPI reported first-quarter 2026 revenue of $5.4 billion and gross profit of $878 million, as management pointed to weather disruptions in the U.S., continued affordability pressures in vehicle retailing, and accelerating gains in aftersales and finance and insurance.
Daniel McHenry, senior vice president and CFO, said the company generated adjusted net income of $104 million and adjusted diluted earnings per share of $8.66 from continuing operations. Management also highlighted capital deployment through acquisitions, share repurchases, and dividends during the quarter.
Weather disruptions and U.S. operating trends
President and CEO Daryl Kenningham said the company estimated first-quarter weather affected results by about $7 million in gross profit, “driven largely by our after-sales business.” Kenningham noted that Group 1 typically continues paying employees during weather closures and that some markets saw stores closed “for as long as a week.”
In U.S. new vehicles, Kenningham said margins “remained robust at over $3,300 per car,” topping $3,250 for the third consecutive quarter. McHenry added that new vehicle unit sales declined on both a reported and same-store basis, citing “ongoing affordability concerns” and a difficult comparison period that included “elevated new vehicle sales ahead of tariffs.” Even with lower volumes, McHenry said new vehicle gross profit per unit increased sequentially from $3,260 to $3,313.
In used vehicles, McHenry said retail units declined on both a reported and same-store basis, partially offset by higher selling prices. He added that used vehicle GPUs fell about 3% as acquisition costs remained pressured in a competitive sourcing environment.
Kenningham told analysts that sourcing has been the “big challenge” in used vehicles, pointing to fewer trades due to a depressed selling rate and a mix skewed toward late-model units. He said Group 1 ended the quarter with 26 days of used inventory and that it relies relatively little on auctions, with 11% of sourcing coming from auctions. While he did not forecast a sharp rebound, he said improved discipline in acquisition, aging management, and pricing decisions—along with constrained supply—“provides a floor on used car PRUs.”
Aftersales strength and collision footprint changes
Management repeatedly emphasized aftersales as a key contributor in the quarter. Kenningham said Group 1 increased U.S. same-store customer pay gross profit by nearly 6% and that U.S. customer pay repair order count rose 2.5%.
McHenry said U.S. parts and service gross margin reached “a new quarterly high.” He attributed results in part to efforts to optimize the company’s collision footprint, including shifting collision space to traditional service capacity and closing collision centers where returns do not meet targets. On a same-store basis, he said customer pay and warranty revenues increased about 3% and 5%, respectively, with corresponding gross profit growth of about 6% and 9%.
In response to a question on the outlook for parts and service, Kenningham said the company still views “mid-single digits” as a reasonable model for the business, but noted a “little warranty headwind” and pressure tied to collision trends and wholesale parts growth. He explained that converting collision space to service capacity involves transition time for equipment and staffing.
Cost reductions and technology initiatives
Kenningham said U.S. SG&A performance “did not meet our expectations,” prompting cost actions in early April. He said the company cut headcount by nearly 700 full-time employees and reduced SG&A costs by about $14 million through contract and vendor eliminations. McHenry later clarified that the $50 million annual cost reduction discussed by management was “all U.S.”
McHenry told analysts the headcount reductions were completed by the end of April and would equate to about $35 million of annualized savings, with contract-related savings of about $15 million—roughly $12.5 million per quarter combined. He also walked through how the actions would have affected first-quarter results, saying U.S. SG&A as a percentage of gross profit would have been about 68.5% instead of roughly 70.5% if the reductions had been in place from Jan. 1.
Kenningham said the cuts were implemented “across the board,” based on SG&A targets by store, market, and business unit, and included both store and corporate roles. He told analysts the company avoided reductions that would impair longer-term growth initiatives, noting it did not cut training, development, and retention programs, and said technician investment continued.
Management also highlighted technology as part of its efficiency efforts. McHenry said Group 1 rolled out “digital deal jacket” across 100% of dealerships in the quarter, which moved deal documentation online and eliminated the need for a role that previously scanned paper documents.
Virtual F&I expansion and rebranding progress
Kenningham said Group 1 has been rolling out a virtual F&I process in the U.S. that allows customers to transact with a virtual agent. He said the capability is now installed in one-third of U.S. stores and accounts for 20% of deals in those locations. Kenningham said the company has seen improved transaction times, positive customer feedback, and lower compensation costs versus in-store transactions, and he expects continued growth through the rest of 2026 and into 2027.
Pete DeLongchamps, senior vice president of manufacturer relations and financial services, said F&I managers are “not” losing opportunities under the model and argued they are gaining efficiency and doing more deals. Kenningham added that virtual F&I agents can handle significantly more deals per day than a traditional in-store role and said the company can also offer different work arrangements, including part-time and work-from-home options.
On branding, Kenningham said Group 1 completed rebranding of half of its U.S. stores and expects to finish by year-end. He said the company believes rebranding will improve marketing effectiveness and customer retention over time. During Q&A, he also noted that March showed “real leverage” in operating advertising spend, as the company increasingly advertises under one Group 1 voice rather than “148 different store voices.”
U.K. improvement, portfolio actions, and Geely plans
Management described improvement in the U.K. business, while acknowledging cost pressures. Kenningham said U.K. same-store new volumes increased 2% and same-store used volumes rose nearly 5%, with sequential PRU improvements. He said U.K. parts and service same-store gross profit increased 20% year-over-year, with customer pay up 18%.
McHenry said U.K. used vehicle same-store revenues rose more than 6% in local currency, while same-store GPUs declined 2%, resulting in higher same-store used gross profit. He also said U.K. same-store F&I PRU reached $1,128, up more than 8% year-over-year, and that same-store customer pay and warranty revenues rose over 6% and 12% in local currency, respectively.
On costs, Kenningham said the U.K. incurred $3 million in incremental expenses tied to “government-mandated national insurance and minimum wage increases.”
During the quarter, Kenningham said Group 1 divested two Mercedes-Benz dealerships in California, describing them as “high-cost operations” with real estate and operating constraints. McHenry declined to provide proceeds but said the multiple received was “much higher than the multiple that the company trades at,” and noted the stores required significant capital expenditures.
In the U.K., Kenningham said the company acquired one Škoda and two Volkswagen dealerships and disposed of one underperforming Volkswagen and one underperforming Škoda store. He also said Group 1 finalized a framework agreement with Geely and plans to open three Geely dealerships in the second quarter in facilities it already owns. In response to an analyst question, he said the locations will use existing buildings within Group 1 clusters and require only “some minor imaging investment.”
Kenningham said the company is also in discussions with Geely and other Chinese OEMs about additional representation, with an intent to gain direct understanding of Chinese brands’ retail models and to pursue potential opportunities tied to Group 1’s corporate fleet business in the U.K.
Separately, Kenningham updated investors on the company’s plan to exit the JLR brand in the U.K., saying it is not reflected as discontinued operations because it is “a very small part” of the business. He said Group 1 has closed one of nine stores and is in active negotiations on the remaining locations with the OEM and potential buyers.
On capital allocation, McHenry said Group 1 ended the quarter with liquidity of $714.3 million, comprised of $191 million in accessible cash and $523 million available under its acquisition line. He said rent-adjusted leverage was 3.09x at March 31. The company generated $147 million in adjusted operating cash flow and $95 million of free cash flow after $53 million in capital expenditures. McHenry said the company repurchased 205,190 shares for $72 million at an average price of $353.08 and paid $7 million in dividends, with $306.3 million remaining under its authorized buyback program.
In closing remarks, Kenningham said the company remains focused on “operating excellence, differentiated after sales and disciplined capital management,” and that the U.K. remains a priority as Group 1 works to improve returns and shape its portfolio.
About Group 1 Automotive NYSE: GPI
Group 1 Automotive, Inc NYSE: GPI is an international automotive retailer headquartered in Houston, Texas. The company operates an extensive network of franchised dealerships, offering new and pre-owned vehicles from leading domestic and import manufacturers. In addition to vehicle sales, Group 1 Automotive provides a full complement of aftersales services, including finance and insurance products, parts distribution, collision repair centers and vehicle maintenance.
Founded in 1997, Group 1 Automotive has grown through both organic expansion and strategic acquisitions to establish a presence across the United States, the United Kingdom and Brazil.
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