Group 1 Automotive (NYSE: GPI) reported Q1 EPS of $1.66, $0.34 better than the analyst estimate of $1.32. Revenue for the quarter came in at $2.7 billion versus the consensus estimate of $2.57 billion.

Outlook

Prior to March, both the U.S. and the U.K. were on track for record first quarter 2020 results, with U.S. Same Store revenues up 10.7 percent reflecting strength in all areas of the business and U.K. Same Store revenue up 3.8 percent, including a very strong order bank for March delivery. Only 65 percent of our sold U.K. order bank was delivered prior to the shutdown order. As the market shutdowns began to roll-out, March U.S. sales dropped sharply, with new and used volumes dropping approximately 50 percent across most markets and parts and service revenues declining about 50 percent as well. This pace continued in early April, but recently has begun to show signs of improvement in the U.S. For the last week of April, U.S. retail unit sales were down approximately 25 percent and parts and services revenues were down about 30 percent as compared with the same week a year ago. In the U.K., shelter in place orders remain in effect across the country and our stores are closed except for providing service to essential workers' vehicles. This service does not generate material gross profit. Expansion of operations within the U.K. is not anticipated until sometime in mid-to-late May.

In all regions, we have taken aggressive actions to reduce costs, with about 4,800 employees furloughed in the U.S., 2,800 employees (over 90 percent of the workforce) furloughed in the U.K., and over 450 employees terminated or furloughed in Brazil. In addition, other costs have also been significantly reduced in all three markets including cuts of as much as 50 percent in management, all remaining Board cash compensation, over 75 percent reduction in advertising expense, and cuts across all other cost categories. As we are starting to see improvements in our weekly sales pace in the U.S., we have begun to recall some of our furloughed workers, with plans to add back 495 positions by June.

While the potential long-term impact of COVID-19 pandemic is difficult to predict, we expect our second quarter results to be significantly lower than the prior year. Moving forward, we anticipate service will recover more quickly than vehicle sales, with both beginning to recover in the late spring and summer months as shelter in place policies continue to be lifted and consumers transition to more normal habits.

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