HOUSTON -

Group 1 Automotive’s second quarter, from the perspective of used vehicles retailed in the United States, was solid.

Overall unit sales were up 18.2 percent. Revenue and gross profit were up on an overall used-vehicle retail basis, as well.

But there was at least one retail used-vehicle metric that the dealer group’s president and chief executive officer, Earl J. Hesterberg, was not satisfied – the gross margins. Looking at worldwide data for the second quarter, used-vehicle retail sales gross margin percentages were down from 7.9 percent in 2014 to 6.8 percent this year. There was a similar result in the U.S., where margins by the same metric were down from 8.2 percent to 7 percent. 

“I’m not exactly sure how you should model it, but I do think it was one of our weaker areas of performance in the quarter,” Hesterberg said. “I don’t think we did a good job. We’ve had 23 days to work on this so we spent a lot of time on it and my impression is that with the improved availability of used vehicles, that we bought a little heavy and also that in some of our oil-challenged markets that there may have been a little bit of shift from new to used, and I think we had too many cars for the quarter.”

Hesterberg noted that although the margins aren’t where he’d like them to be, he was still satisfied with his dealers’ ability to offload vehicles in a timely nature.

“You’ll note from our inventory level – 32 days’ supply – we don’t hold onto these things,” Hesterberg said. “We have a discipline that encourages our people to liquidate these things one way or another and keep our inventory in mind. So we retailed far too many cars at a low margin during the quarter compared to what we should normally do. But it leverages our F&I business, it gives us money to the bottom line, and you can see that we have some pretty powerful throughput.

“That’s something that we’re going to work to move up a bit,” he continued. “I’ve learned not to forecast margins because I’m not very good at that. The market dictates a lot of that. So I think we can do a better job there. I wasn’t particularly impressed with our margin result. I was impressed with our volume result.”

For more details on Group 1’s U.S. used-vehicle results reported on Friday, check them out here.