Group 1 Automotive NYSE: GPI reported second-quarter 2026 revenue of $5.4 billion, gross profit of $861 million and adjusted net income from continuing operations of $115 million, or $9.61 per diluted share, as lower new- and used-vehicle volumes pressured results.
President and Chief Executive Officer Daryl Kenningham said persistent vehicle affordability challenges, difficulty sourcing used vehicles and short-term disruptions from the company’s U.S. rebranding initiative contributed to the volume decline. He said the company remains focused on its cluster strategy, after-sales operations, expense management and capital allocation.
Hennessy Acquisition Expands Atlanta Presence
Group 1 announced an agreement to acquire Hennessy Automobile Companies, a 10-dealership group in Atlanta expected to generate about $1.7 billion in annualized revenue. The transaction includes two Lexus dealerships, three Land Rover stores, two Porsche stores, and Honda, Ford and Cadillac dealerships.
The acquired stores have 500 service bays and 280 technicians, with average dealership revenue of approximately $170 million, according to the company. Kenningham said the stores’ fixed-operations gross margins are above the national average and their EBITDA margins exceed 7%.
The acquisition, along with the retention of Stone Mountain Honda and Stone Mountain Toyota, will expand Group 1’s Atlanta footprint from three to 15 dealerships. Atlanta is expected to become the company’s second-largest market by revenue and its ninth U.S. cluster market.
Chief Financial Officer and U.K. Operations CEO Daniel McHenry said the Hennessy purchase price is approximately $1.3 billion, including $1 billion of goodwill, more than $200 million of freehold property or purchased assets, and $100 million of other assets. The company plans to finance the deal with long-term debt, initially using a 364-day bridge loan before seeking bond-market financing in the third quarter.
McHenry said Group 1 expects the transaction to be immediately accretive to earnings after closing later this year, subject to customary conditions. The company expects its rent-adjusted leverage ratio to remain below 4 times at closing, versus 3.3 times at June 30, and plans to return to its target leverage level by mid- to late 2027.
Management also said it expects to sell additional smaller, underperforming or lower-volume stores as it shifts its portfolio toward premium brands, larger dealership rooftops, growth markets and clusters. McHenry said proceeds from dispositions in the third and fourth quarters are expected to help pay down acquisition-related debt.
Volume Pressures and Used-Vehicle Sourcing
In the U.S., Group 1’s new-vehicle sales declined on both a reported and same-store basis. McHenry cited consumer affordability pressures, inventory constraints for certain brands and difficult comparisons with the prior-year period. New-vehicle gross profit per unit declined sequentially to $3,260 from $3,313, though it remained in line with the fourth quarter of 2025.
Kenningham said about two-thirds of the company’s 5% same-store new-vehicle sales decline was attributable to transitional issues tied to store rebranding, including customers having difficulty finding renamed dealerships through organic online searches. The company has rebranded more than 60 U.S. stores, including nearly all of its Texas and Maryland locations, and plans to continue the effort through the rest of the year.
Management said it is supplementing organic search with paid search and adapting to search behavior influenced by large language models. Kenningham said the company expects a unified Group 1 brand to improve marketing efficiency and increase its ability to capture sales and service business from households with multiple vehicles.
Used-vehicle volumes also declined as sourcing competition and acquisition costs remained elevated. Group 1 entered the quarter with 26 days’ supply of used vehicles and chose to prioritize profitability rather than replenish inventory through auction purchases that could pressure gross profit.
Kenningham said average used-vehicle transaction prices increased about $1,400 year over year, with larger increases in the important three-year-old vehicle segment. The company is seeking to source more affordable vehicles through more aggressive bids, improved appraisals and greater emphasis on trade-closing rates.
Aftersales Strategy Shifts Toward Retention
Group 1 said after-sales remains central to its strategy, although the business is navigating a changing customer mix. Vehicles sold during the lower industry-volume period of 2020 through 2022 are now aging out of factory warranties, a point at which customers are more likely to seek service from alternative providers.
Same-store customer-pay after-sales revenue increased 4% in the quarter, while warranty revenue rose about 1%. Customer-pay gross profit increased roughly 3%, and warranty gross profit rose about 4%. Management noted that the results faced a difficult comparison with the prior year, when warranty revenue benefited from Toyota Tundra and General Motors engine recalls.
The company said more than half of its customer-pay growth came from increased customer counts. It is increasing its emphasis on service-advisor training, affordability messaging and customer retention programs. A $17.76 oil-change promotion launched in June produced the quarter’s strongest service traffic, conversion and margins, according to Kenningham.
Group 1 is also rolling out its One Care discounted maintenance plan across U.S. stores and targeting used-car customers, who typically have lower service retention rates than new-car buyers. Same-store technician headcount rose 2% year over year in both the U.S. and the U.K.
Cost Actions, U.K. Progress and Capital Allocation
Group 1 completed a U.S. cost-reduction effort initiated in April, exceeding its target to reduce headcount by 700 employees and eliminate $50 million of expenses from its U.S. store base. The company reported U.S. non-GAAP SG&A leverage of 66.4% in the quarter.
McHenry said that if U.S. SG&A had remained at its first-quarter percentage of gross profit, the business would have incurred an additional $19 million of expense in the second quarter. The company expects approximately $12.5 million of quarterly savings in each of the remaining two quarters of 2026, with savings continuing into 2027.
In the U.K., same-store new-vehicle volume rose nearly 4% while gross profit per unit remained stable. Aftersales and F&I revenue and gross profit increased on a same-store basis, although used-vehicle conditions remained challenging. The company sold four underperforming Jaguar Land Rover dealerships in the U.K., generating approximately £50 million, and said it may dispose of additional underperforming stores.
As of June 30, Group 1 had $684 million of liquidity, including $322 million of accessible cash and $362 million available under its acquisition line. Year-to-date adjusted operating cash flow was $211 million, while free cash flow was $118 million after $93 million in capital expenditures. The company repurchased 205,190 shares for $72 million during the first half at an average price of $353.08 and had $306.3 million remaining under its share-repurchase authorization.
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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