Group 1 Automotive, Inc. (NYSE:GPI) Q2 2023 Earnings Call Transcript

Operator: Our next question comes from David Whiston from Morningstar. Please go ahead with your question.

David Whiston: Thanks. Good morning. Just going back to the service technicians, particularly the UK headcount increase, I know you’ve got some good initiatives like the four-day work week that went out, but I’m just curious in the UK market what else may have helped there? Are people perhaps more eager to work than they were a year or two ago? Just any other labor market dynamics you can share specific to that market? Thanks.

Daryl Kenningham: We’re experimenting with four-day work week there, David. We are — it’s not nearly as ingrained there as it is in the US. The work schedules in the UK are different at retail. So the value of a four-day work week is different there than it is in the US. But the things we’re trying to do are make sure that our compensation is certainly at a competitive level and we’re working to try to ensure that we’re kind of the workplace of choice for our team. We’ve also added some significant resources in our aftersales team at a corporate level in the UK, which has helped us significantly put some more focus and emphasis on technician recruiting.

David Whiston: Thanks. And on used, obviously, it’s a struggle for everybody, but your metrics, to me, they didn’t — the year-over-year delta just didn’t seem as large of a decline as I remember seeing at some of the other dealers. And I’m just curious or maybe are you not cutting prices right now quite as hard there as prices are coming down? Or are you just procuring inventory smarter than in the past?

Daryl Kenningham: Well, I’d love to say we’re smarter. I would say we’re trying to be disciplined. We implemented some new technology about a year ago that I think is really helping us with one of our partners, and it’s helping us stay more disciplined on our pricing. And I believe that’s helping us quite a bit. The old days of where a used car manager will go and price their inventory, we’re kind of trying to get away from that because we want the technology to help us lead that. And so we implemented some things about a year ago to help us do that, and I believe that’s paying some dividends.

Operator: Our next question comes from Rajat Gupta from JPMorgan. Please go ahead with your question.

Rajat Gupta: Great. Thanks for taking the question. I just wanted to like ask a broader picture question just on — in terms of consumer, health of consumer. Obviously, you talked about the interest rate impact and how that’s impacting news and like your financing. But in general, we have seen new car volumes held in much better than expected so far year-to-date. Curious to what do you think might be driving that in the context of the pricing in the rate environment? And what is your sense of how it can persist through the course of the year? And tied to that, is there a range you can give us in terms of how you think the new car GPUs might play out into the third quarter and maybe into the fourth? And I have a follow-up. Thanks.

Daryl Kenningham: Rajat, in terms of the consumer, we see consumers just looking at the order banks in the UK, looking at the presales in the US. I mean to us, that indicates a pretty healthy, strong consumer. Looking at the aftersales pull-through, we see evidence of a pretty strong consumer. We’re seeing a little pressure in F&I, but it’s just a little bit, honestly, I mean it’s $100. I mean — so from a consumer perspective, we see good things there. And I don’t know if that will change. In terms of the gross profit trends you asked about on new cars, I don’t believe we will see anything different than what we have seen over the last couple of quarters, three quarters where it’s a gradual decline from where it’s been, but we don’t see any cliffs out there at all.