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The Company is an operator in the automotive retail industry, which through its operating subsidiaries, markets and sells a range of automotive products and services.
The important figures for auto sales are out with total vehicle sales for January down by 4.7% and a dip in daily selling rate by 8.5%. Despite this weakness Group 1 Automotive were able to improve their first-quarter total revenues by 7.4%, thanks to its recent dealership acquisition. However, on a same-store basis revenues declined by 2.3% on account of lower volumes growth in New Orleans market. Gross margin eroded by 50 bps as a result of 60 bps declines in both new vehicle and parts and service margins. New vehicle margins were impacted by continuing weakness in the company’s domestic stores, with Ford F-Series sales down 25% and lower Chrysler margins reflecting a decrease in manufacturer dealer incentives and rebates realized. Group 1’s margins were also negatively impacted by continued weakness in the California market.A significant reduction in domestic inventory levels to 69 days’ supply from 99 days supply’ has ensured improvement in New vehicle inventory days’ supply by 6 days to 57 days. As a result of these inventory reductions, weighted average floorplan borrowings declined $28.7 million, partially offsetting a 73 bps increase in the weighted average interest rate.It is expected that total industry-wide sales of new vehicles throughout 2007 will be lower than 2006 and remain highly competitive. Group 1 has already lowered its 2007 full-year guidance to $3.75-$4.05 per diluted share from $4.00-$4.25. The uncertain automotive retailer industry indicates clear signals to investors to wait before investing in Group 1 Automotive.
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