Group 1 Automotive, Inc. (NYSE:GPI) Q1 2024 Earnings Call Transcript

Rajat Gupta: Great. Thanks for getting me back in the queue. I just wanted to clarify on SG&A in the U.S. in particular. If you look at like the gross profit versus the SG&A, we saw a slightly higher pickup on the SG&A dollars versus the gross profit. I mean, was that just seasonality, maybe some deleveraging because of the service business? Just curious what happened there? And how should we think about that leverage profile through the course of the year.

Daniel McHenry: Rajat, there’s a couple of things, it’s Daniel. What we’ve always said is coming out of this, we would expect that SG&A as a percent of gross, we drop from 74% pre-pandemic around 70% with kind of 400 basis points out of SG&A as a percent of gross going forward. Clearly, some of the grosses are dropping on new vehicles, and we continue to see about $100 a month reduction in that. And that affects SG&A as a percent of gross. There’s a couple of other things that I would add. Clearly, we didn’t get all of the cost out in the U.K. in the quarter and for its full benefit that we will see going forward in quarter two. So we would expect, on an ongoing basis, SG&A as a percent of gross, all things being equal to continue to reduce in the U.K. taking on some of these new acquisition stores often there’s slightly elevated costs that come as we take along some of these new acquisition stores and particularly to buy store halfway through a month, it’s just tougher.

SG&A as a percent of gross as we’ve added those stores in. So I think you need to take some of that into a kind as well whenever you look at the change in SG&A as a percent of gross.

Rajat Gupta: I understood, yes, that makes sense. Thanks for clarifying.

Daniel McHenry: Thank you, Raja.

Operator: And ladies and gentlemen, with that being our final question for today, we’ll close out today’s conference call and presentation. We do thank you for joining. You may now disconnect your lines.