HOUSTON -

As Group 1 Automotive  posted record third-quarter net income as a company and watched its used-vehicle retail operations generate strong gains, too, president and chief executive officer Earl Hesterberg said he “wasn’t particularly happy” with the wholesale side of its performance.

First reiterating the upbeat news, Group 1 reported record third-quarter net income of $31.3 million and recorded diluted earnings per common share of $1.32 for the period that ended Sept. 30.

The company said on Thursday its net income increased 31.6 percent from the comparable, adjusted prior-year period, which excluded a non-cash asset impairment charge.

Group 1 determined that its year-to-date adjusted net income increased 31.4 percent to a record $84.2 million. Adjusted diluted earnings per common share were $3.54, making this the best first nine-month results in the company’s history.

“Group 1 reported all-time, record-setting revenues, gross profit, net income and diluted earnings per common share in the third quarter, driven by strong growth in all segments of the business, including record results in finance and insurance,” Hesterberg said.

“Group 1’s new-vehicle unit sales continue to outpace industry retail sales, reflecting the strength of our brand mix and strong execution by our operating team,” he continued. “In addition, I am especially proud of the growth our team has delivered in used retail unit sales, where we have significantly outperformed the market this year as well.”

The company reported that its retail used-vehicle average selling price increased 2.6 percent to $20,612.

Group 1 retailed 19.5 percent more units in the quarter, turning 22,433 units, up from 18,770 used models a year earlier. The total helped to drive the 17.7-percent gross profit and 22.6 percent revenue growth on used models.

During a question-and-answer session with Wall Street analysts, Thursday’s conference call moved to a discussion about Group 1’s wholesale performance. During the third quarter, the company wholesaled 24.3 percent more units than a year earlier as the figure climbed from 9,697 units to 12,049 units.

However, the decline in wholesale prices analysts from NADA Used Car Guide and Black Book have been mentioning for weeks chipped away at Group 1’s gross margin percentage for its wholesale operation.

“We actually lost a little money on wholesale for the quarter for the first time in a long time,” Hesterberg said. “I wasn’t particularly happy about that. We lost money in the first two months of the quarter but by the third month we had gotten it straightened out.

“One of the reasons we run our used-car business so tightly with a 30 days’ supply — which I think over the years, plus or minus a day, is usually what we have — that’s so we can reload with cheaper cars very quickly,” he continued. “As you get into the winter obviously the prices of used cars do decrease. You want to buy as many as you can at that lower price level.”

The questioner referenced the Manheim Used Vehicle Value Index, which stayed flat in September after dropping for six months in a row.

“There’s been a change in the market, most of it seasonal but probably more than that, so we have to stay nimble and use the data available to us so we can buy on the market and not flush out too much inventory that we bought above market prices some period of time ago,” Hesterberg said.

“There’s always an opportunity during the winter if you manage your business carefully,” he continued. “You want to stock up with cars from the low prices in the winter so you’re ready for the spring selling season in March. You don’t want to have too heavy of an inventory going into the lowest part of the pricing curve. There’s an opportunity for all retailers if you run your business well.”

More Details of Third-Quarter Results

The company highlighted other elements of its third-quarter performance, making a year-over-year comparison unless otherwise noted. That rundown included:

—Setting new all-time records, total gross profit grew 17.1 percent on 25.9 percent higher revenues of $2.0 billion.

—New-vehicle gross profit increased 18.5 percent on 32.3 percent higher revenues as the company retailed 34.0 percent more units. Average vehicle selling price declined 1.2 percent, to $33,050, as the mix shifted from luxury and trucks to mid-line imports.

—Parts and service gross profit increased 8.1 percent on revenue growth of 7.1 percent.

—Finance and insurance gross profit per retail unit increased $64, to an all-time record $1,220, as penetration rates improved in both finance and vehicle service contracts.

—Selling, general and administrative expenses as a percent of revenues improved 110 basis points, to 10.9 percent.

—Selling, general and administrative expenses as a percent of gross profit improved to 74.2 percent, from both the prior-year period and the second quarter on a comparable basis as the company continued to leverage gross profit growth.

—Operating margin remained flat, at 3.4 percent, from the prior-year and second-quarter periods on a comparable basis.