Group 1 Reports Strong Fixed Ops in Second Quarter

Group 1 Automotive reports strong fixed operations results in the second quarter despite experiencing severe wind and flooding in the Houston area from Hurricane Beryl. That coincided with a one-week shutdown of its CDK Global dealer management systems.

“We do believe we could’ve sold more vehicles and performed additional service and repair work in the June quarter if we had been operating at full capacity with our CDK dealer management systems,“ says Daryl Kenningham, president and CEO of Houston-based Group 1.

The service interruption at CDK Global, which was felt across the U.S. auto retail industry, primarily affected Group 1 from June 19 to June 26. Group 1’s U.K. dealerships use a different dealer management system provider and were not affected, the company says.

For that week, Group 1’s U.S. stores used “alternative processes” to avoid closing down, but when CDK service came back up, the dealership chain had “thousands” of entries to catch up on—which it did by June 30, Kenningham says.

Overall, Group 1 says its  second-quarter income from operations fell by $9 million due to “catastrophic events.” Daniel McHenry, chief financial officer, says that was roughly two-thirds due to the CDK interruption and one-third due to the weather.

Despite that, Group 1 reports its U.S. parts and service revenue on a consolidated basis was a quarterly record $497.4 million, up 1.3% vs. a year ago. On a same-store basis, allowing for changes to its dealership network, U.S. parts and service revenue was $463.3 million, down 1.3%.

Year to date, Group 1 same-store U.S. parts and service revenue is $934.6 million, up 1.1%. The company says year to date, its collision revenue, including parts sales, is down 8% vs. a year ago; wholesale is down 3%; warranty is up 7%; and customer pay, the biggest and most profitable category, is up 3%.

McHenry says that in April and May– before the CDK outage – customer-pay revenue was up 6% compared to a year ago, and warranty revenue was up 12.5%.

Group 1 has grown fixed ops largely by adding technicians, which increases service capacity, Kenningham says. He says the Group 1 headcount since 2019 has been down 5%, but service technicians have been up 20% in the same period.

“We’ve done a really good job managing our overall headcount and only adding where it drives capacity and after-sales effectively. So, that’s allowed us to maintain our after-sales growth over a period of time” while also controlling costs, Kenningham says.

In the second-quarter report, the company says it had a total of 16,011 employees as of Dec. 31, 2023. That included 12,493, or 78%, in the U.S., with the rest in the U.K.