Group 1 Automotive profit plunges 55% on $68M impairment charges
Automotive retailer missed Q4 earnings estimates by 21% as non-cash asset writedowns and rising SG&A expenses pressure margins
Group 1 Automotive reported a 55% decline in fourth-quarter profit, missing analyst expectations by a wide margin as non-cash asset impairment charges and rising operating costs weighed on the automotive retailer's performance.
The Houston-based company posted net income from continuing operations of $43 million for the quarter ended December 31, 2025, down from $94.6 million in the prior-year period. The decline was primarily driven by $68.2 million in non-cash asset impairment charges, largely attributed to the company's U.S. reporting unit. For the full year 2025, total impairment charges reached $192.8 million.
Adjusted earnings per share of $8.49 missed the consensus estimate of $9.36, representing a 20.8% shortfall, according to Zacks Investment Research. Revenue of $5.58 billion edged up 0.6% year-over-year but fell short of analysts' expectations of $5.66 billion.
Despite the quarterly earnings miss, Chief Executive Officer Daryl Kenningham sought to highlight the company's broader achievements. "The fourth quarter capped off a record year for Group 1," Kenningham stated in the earnings release. "Our revenues totaled $22.6 billion, up 13.2% year over year. We achieved record revenues across all of our major business lines and record gross profits in parts and service and F&I."
For the full year 2025, Group 1 reported record revenues of $22.6 billion, a 13.2% increase from the prior year, and record gross profits of $3.6 billion, up 11.8%. The company also repurchased approximately 10.1% of its outstanding common shares during the year, demonstrating its commitment to returning capital to shareholders.
However, margin pressure emerged as a concerning trend. Selling, general and administrative expenses as a percentage of gross profit increased to 71.7% in the fourth quarter, up 187 basis points year-over-year. On an adjusted basis, SG&A reached 72.4% of gross profit, climbing 233 basis points. For the full year, SG&A expenses rose 304 basis points to 70.3% of gross profit.
The company's operating performance reflected broader challenges facing the automotive retail sector. According to industry analysis, dealerships are navigating margin pressures, geopolitical uncertainties affecting costs and demand, and an expected stagnation in vehicle sales for 2026. Consumer sentiment, while slightly up in January 2026, remains significantly lower year-over-year, with affordability emerging as a primary driver for vehicle purchases.
Analysts have taken note of the margin compression. Benchmark maintained a "Hold" rating on the stock while revising down its projections for new vehicle sales, aftersales, and G&A leverage. The consensus rating among eleven analysts covering the stock stands at "Hold," with an average 12-month target price of $473.25, according to MarketBeat data.
Group 1's shares, which traded at $396.41 as of late January, have a 52-week range of $354.67 to $487.85. The stock is currently priced below its 200-day moving average of $425.25, suggesting investor wariness following the earnings disappointment.
Looking ahead, management indicated that the company expects to undertake additional actions in 2026 to further optimize operations and reduce costs. The retailer plans to maintain its focus on integrating acquired dealership operations efficiently, having acquired operations with approximately $640 million in expected annual revenues during 2025 while divesting 13 underperforming stores with annualized revenues totaling around $775 million.
Notably, the company did not provide specific 2026 earnings guidance in its earnings release, leaving investors without clear visibility on near-term performance expectations. This absence of forward-looking targets comes at a time when the automotive retail sector is seeing robust mergers and acquisitions activity, with dealerships increasingly focused on earnings quality and portfolio optimization.
The earnings miss underscores the challenges facing even established automotive retailers as they balance expansion strategies with operational efficiency in an increasingly competitive environment characterized by margin pressure and uncertain consumer demand.