Group 1 Automotive Acquires Two High Volume Lexus Dealerships in Southern California
- Acquisition of high-performing Lexus dealerships in California
- Expected annual revenues of $350 million
- Year-to-date acquired revenues for 2024 totaling $850 million
- Share repurchase update of 174,964 shares at an average price of $264.88, totaling $46.3 million
- None.
Insights
The acquisition of Newport Lexus and Tustin Lexus by Group 1 Automotive represents a strategic move to strengthen its presence in the luxury automotive market, particularly in the affluent region of Southern California. The expected $350 million in annual revenues from these dealerships is a significant addition to Group 1's portfolio, which has seen a year-to-date total acquired revenues for 2024 of $850 million. This follows a substantial $1.1 billion in acquired revenues in 2023, indicating a consistent growth trajectory for the company.
The automotive retail industry is highly competitive and dealerships with strong brand affiliations, such as Lexus, can command higher margins due to the brand's luxury status. Group 1's focus on larger, more profitable dealerships aligns with industry trends where scale can lead to operational efficiencies and improved negotiating power with manufacturers. The move to dispose of smaller, less profitable stores may improve overall profitability and streamline operations.
Group 1 Automotive's update on share repurchase activity is a signal of the company's financial health and management's confidence in its stock value. Repurchasing 174,964 shares at an average price of $264.88 for a total of $46.3 million reflects a proactive approach to capital allocation. With $97.0 million still available under the current authorization, this suggests that the company has a robust cash flow and is committed to delivering shareholder value. Share repurchases can be accretive to earnings per share by reducing the number of shares outstanding, potentially leading to a positive market reaction.
Investors often view share buybacks as a positive indicator of a company's belief in its intrinsic value and future prospects. However, it is important to consider the opportunity cost of these buybacks, as the funds could alternatively be used for further acquisitions or internal investments. The balance between returning value to shareholders and investing in growth is a critical aspect of financial strategy that investors should monitor closely.
The strategic portfolio optimization mentioned by Group 1's President and CEO highlights the importance of brand alignment and market positioning in the automotive retail sector. Lexus, being a luxury automotive brand, offers a dealership model that can yield high revenue per unit sold. The emphasis on growth through the acquisition of larger dealerships is indicative of the industry's consolidation trend, where economies of scale can be a significant driver of profitability.
Group 1's Southern California expansion is particularly noteworthy given the region's high concentration of wealth and preference for luxury vehicles. The acquisition not only increases market share but also enhances the company's brand portfolio, potentially attracting a more affluent customer base. The experience Group 1 has in the market area can be leveraged to maximize the performance of the newly acquired dealerships, optimizing both sales and after-sales service revenue streams.
- Expected Annual Revenues of
$350 Million - The Company Also Provides a Share Repurchase Update
The Company also updated its year-to-date share repurchase activity of 174,964 shares of common stock at an average price of
Group 1's President and CEO Daryl Kenningham stated, "We are thrilled to expand our Southern California platform with this exceptional luxury brand. Our strong relationship with Lexus and experience in this market area make this a tremendous addition for Group 1. The transaction highlights our commitment to strategic portfolio optimization with growth through larger dealership acquisitions while disposing of smaller, less profitable stores. We also intend to opportunistically execute share repurchases when our stock represents an attractive value."
The Company's share repurchases may be made from time to time, based on market conditions, legal requirements, and other corporate considerations, in the open market or in privately negotiated transactions. The Company expects that any repurchase of shares will be funded by cash from operations. Repurchased shares will be held in treasury.
ABOUT GROUP 1 AUTOMOTIVE, INC.
Group 1 owns and operates 200 automotive dealerships, 262 franchises, and 43 collision centers in
Group 1 discloses additional information about the Company, its business, and its results of operations at www.group1corp.com, www.group1auto.com, www.group1collision.com, www.acceleride.com, www.facebook.com/group1auto, and www.twitter.com/group1auto.
FORWARD-LOOKING STATEMENTS
This press release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, which are statements related to future, not past, events and are based on our current expectations and assumptions regarding our business, the economy and other future conditions. In this context, the forward-looking statements often include statements regarding our strategic investments, goals, plans, projections and guidance regarding our financial position, results of operations and business strategy, including the annualized revenues of recently completed acquisitions or dispositions and other benefits of such currently anticipated or recently completed acquisitions or dispositions. These forward-looking statements often contain words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "should," "foresee," "may" or "will" and similar expressions. While management believes that these forward-looking statements are reasonable as and when made, there can be no assurance that future developments affecting us will be those that we anticipate. Any such forward-looking statements are not assurances of future performance and involve risks and uncertainties that may cause actual results to differ materially from those set forth in the statements. These risks and uncertainties include, among other things, (a) general economic and business conditions, (b) the level of manufacturer incentives, (c) the future regulatory environment, (d) our ability to obtain an inventory of desirable new and used vehicles, (e) our relationship with our automobile manufacturers and the willingness of manufacturers to approve future acquisitions, (f) our cost of financing and the availability of credit for consumers, (g) our ability to complete acquisitions and dispositions, on a timely basis, if at all and the risks associated therewith, (h) foreign exchange controls and currency fluctuations, (i) the armed conflicts in
Investor contacts:
Terry Bratton
Manager, Investor Relations
Group 1 Automotive, Inc.
ir@group1auto.com
Media contacts:
Pete DeLongchamps
Senior Vice President, Manufacturer Relations, Financial Services and Public Affairs
Group 1 Automotive, Inc.
pdelongchamps@group1auto.com
or
Clint Woods
Pierpont Communications, Inc.
713-627-2223
cwoods@piercom.com
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SOURCE Group 1 Automotive, Inc.
FAQ
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