Group 1 Automotive, Inc. (GPI) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. Welcome to Group 1 Automotive's Second Quarter 2026 Financial Results Conference Call. Please be advised that this call is being recorded. At this time, I'd like to turn the floor over to Mr. Pete DeLongchamps, Group 1's Senior Vice President, Manufacturer Relations, Financial Services and Corporate Development. Please go ahead, Mr. DeLongchamps.

Thank you, Jamie, and good morning, everyone, and welcome to today's call. The earnings release we issued this morning and a related slide presentation that includes reconciliations related to the adjusted results we will refer to on this call for comparison purposes have been posted to Group 1's website. Before we begin, I'd like to make some brief remarks about forward-looking statements and the use of non-GAAP financial measures. Except for historical information mentioned during the conference call, statements made by management of Group 1 are forward-looking statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve both known and unknown risks and uncertainties, which may cause the company's actual results in future periods to differ materially from forecasted results. Those risks include, but are not limited to, risks associated with pricing, volume, inventory supply, conditions of markets, successful integration of acquisitions and adverse developments in the global economy and resulting impacts on demand for new and used vehicles and related services. Those and other risks are described in the company's filings with the Securities and Exchange Commission. In addition, certain non-GAAP financial measures, as defined under SEC rules, may be discussed on this call. As required by applicable SEC rules, the company provides reconciliations of any such non-GAAP financial measures to the most directly comparable GAAP measures on its website. Participating with me on today's call, Daryl Kenningham, our President and Chief Executive Officer; and Daniel McHenry, CEO of the U.K. operations and Chief Financial Officer. I'd now like to hand the call over to Daryl.

Thank you, Pete. Good morning. At Group 1, we try to focus on controlling what we can control. In today's environment, the Group 1 business model built around our proven cluster strategy, leading aftersales operations and disciplined capital allocation remains strong, and we continue to believe that this model will deliver long term. Today, I'm going to focus my remarks on near-term actions we've taken to build on our strong foundation and unlock value for our shareholders, including the exciting Hennessy Automobile transaction we announced earlier today. Our second quarter results were impacted by a variety of factors: persistent affordability challenges for the automotive consumer, challenges sourcing used vehicles, and short-term disruption from our largely completed corporate rebranding efforts combined to lower our new and used vehicle volumes. While this drop in volumes was disappointing, we're encouraged by steady GPU performance in both new and used vehicles. Starting with used vehicles. We began the quarter with 26 days supply, and in some markets, we never really recovered from that low day supply. An easy solution would have been to restock by purchasing auction units. However, in our minds, that's not a great outcome given the potential gross profit impact that can have. We prioritized PRU, and we're able to hold margins year-over-year even though average transaction prices were up $1,400 on average. And in 3-year-old cars, one of our largest volume segments, ATPs were up much more than that. To improve our execution, we're making concentrated efforts to improve our sourcing of less expensive vehicles, being more aggressive with bids, improving our appraisal practices and putting more emphasis on trade closing rates. Our focus remains on organic sourcing. Although it's more difficult these days due to higher negative equity levels, we feel that we have opportunity to improve. Turning to aftersales. The U.S. aftersales business, which remains central to our long-term strategy, is undergoing a transitory shift. Consumers who brought vehicles during the low industry volume period of 2020 to 2022, are now coming in for service today -- at a time when many have reached the end of their factory warranties, which is generally a high defection point. Because of those lower SAAR volumes in those years, there are fewer of those high-value, high RO value customers in the market. They have more provider options, and they have more increased affordability pressures. To ensure we maintain our aftersales momentum in this changing market, we're adjusting our approach. We've done a great job at Group 1 adding technicians over the years, including in the second quarter. Now we are going to put additional focus on upgrading our service adviser skills. We need to ensure our advisers are equipped to drive sales of the services our technicians perform, getting more out of this additional technician capacity that we've developed. To capture those 4- to 7-year customers, we will also put more affordability messaging into our service marketing. As an example, in June, we launched a $17.76 oil change, which drove our best traffic of the quarter with strong conversion and good margins. We also have data that confirms we recaptured some at-risk customers that were going to the aftermarket. We were able to execute this successful promotion because of our investments in our proprietary customer data platform, which allowed us to understand what offering would resonate with our customers and who we should target. To put more focus on retention in a high defection environment, we are rolling out OneCare, our discounted maintenance plan to all Group 1 U.S. stores. This will keep our best customers coming back to us for their factory recommended maintenance. Additionally, we're also targeting used car customers whose service retention is typically lower than that of new car customers. We feel these steps will allow us to maximize our customer pay business in what is certainly a changing market. A final note on aftersales. We were pleased with our 4% same-store sales customer pay growth, which lapped a 14% growth quarter last year, and it was 10% before the CDK impact. Over half of our CP growth this quarter was attributable to increased customer count. Also in the second quarter of 2025, same-store U.S. warranty revenue grew approximately 32%, driven by Tundra and GM engine recalls. And this elevated warranty traffic also generated a surge of non-warranty repair and replacement work through our service lanes. Setting aside last year's onetime recall benefit, the underlying performance of the aftersales business remains resilient and reinforces our confidence in the trajectory from here. Now turning to F&I. Two years ago, we introduced virtual F&I in our U.S. stores, giving customers the opportunity to complete their transactions virtually with a remote F&I manager. This innovation is now installed in 66 stores across the U.S. And in those stores, 20% of our F&I volume is virtual. We're seeing strong PRU performance, significantly improved transaction times and lower compensation costs compared to in-store transactions. Customer feedback has been extremely positive, and we expect to continue our rollout through the rest of the year. Virtual F&I is only one part of our broader technology effort. As outlined last quarter, we are currently leveraging artificial intelligence to support customer acquisition and retention, improve our inventory sourcing and digital processes to reduce G&A expenses. We continue to drive these efforts, which remain a key strategic focus for Group 1, and we look forward to sharing more details in the coming quarters. Turning to our Group 1 U.S. store rebranding initiative, another key investment in our future. At Group 1, we believe our business is local. Our business model works when we sell and service customers locally. Prior to this rebranding initiative, we had over 40 different brand names on our stores with multiple brand names even within the same market. We decided to rebrand to get more leverage locally on our marketing spend and our philanthropy efforts. We've now rebranded over 60 stores, including almost all of our Texas and Maryland stores. This is more than half of our eligible U.S. footprint, and we will continue rebranding our efforts through the rest of the year. Rebranding is the right thing to do long term, but it does have its short-term challenges. But we believe they are transitory. As an example, given the time it takes organic search to index website changes, some customers have had difficulty finding our new store names, and that has impacted traffic and unit volumes. We are adjusting as we go and supplementing organic search with targeted paid search efforts. We're also addressing the shift towards large language model-driven results and anticipate being well positioned here going forward. In the long term, we believe going to market with a single strong unified brand will improve the effectiveness of our marketing investments and drive greater customer retention, particularly as we focus on owning a greater share of garage in our cluster markets. For example, if a family owns a new Ford F-150, a Toyota Camry and a pre-owned BMW, we want to own all of the sales and service transactions associated with that household. So far, in households with multiple vehicles, we are encouraged by the progress we are seeing in driving a greater share of garage. Turning to costs. In an uncertain environment, it's critical that we control costs. As we discussed last quarter, we took decisive action in early April with the goal of reducing our headcount by 700 and eliminating $50 million in expense from our U.S. store base. We were able to accomplish this in the second quarter, exceeding our targets in headcount and dollars. Despite lower gross profit in the quarter, our tightly managed personnel costs improved compensation expense as a percentage of gross profit. This quick execution is what drove our U.S. non-GAAP SG&A leverage of 66.4%, a level we were pleased with. We will continue to size our cost structure appropriately for the operating environment in both the U.S. and the U.K. while investing in the areas that we believe will create the most value over time. And lastly, we remain committed to disciplined capital allocation. During the quarter, we acquired 4 U.S. dealerships, retaining 2 of them, Stone Mountain Honda and Stone Mountain Toyota, which we expect to generate approximately $205 million in annual revenue. Year-to-date, we have acquired and integrated dealership operations, representing approximately $340 million in expected annual revenues. We also divested 4 Jaguar Land Rover dealerships in the U.K. during the quarter. And of course, earlier this morning, we announced the acquisition of Hennessy Automobile Companies, which along with Stone Mountain Honda and Stone Mountain Toyota, will boost our presence in the Atlanta market from 3 to 15 dealerships, making Group 1 a dominant force in an outstanding growth market. Atlanta will become our second largest market in revenue and our ninth cluster market in the U.S. We plan to execute the same proven playbook in Atlanta as we have in other cluster markets such as Oklahoma and Boston -- such as Houston and Boston, to offer customers great convenience and choice while driving operating efficiency and attractive long-term returns for our shareholders. Atlanta is a robust automotive market with strong fundamentals. The city is the fastest-growing metropolitan statistical area outside of Texas and the largest luxury vehicle market in the Southeast. The Hennessy transaction includes 10 dealerships with a fabulous brand portfolio, including 2 Lexus stores, 3 Land Rover stores, 2 large Porsche stores, Honda, Ford, and Cadillac. The facilities contain 500 service bays staffed with 280 technicians. The Hennessy store's average revenue is $170 million, significantly larger than an average Group 1 store and more than double the national average. Additionally, fixed operations gross margins are above the national average and EBITDA margins are above 7%. We expect the Hennessy dealerships to generate approximately $1.7 billion in annualized revenue and pending normal closing conditions be immediately accretive to our earnings later this year. The acquisition is about much more than just acquiring an outstanding group of great stores. It is also about Group 1 repositioning our portfolio around stores that fit our desired success profile, premium brands, high-revenue rooftops, growing markets and clusters. At the same time, we are moving away from stores and markets that do not fit that profile. We will have more announcements on some of those planned actions as we execute them in the months ahead. We remain committed to disciplined capital allocation. Last year was the largest stock repurchase year in our history, $550 million in buybacks. This year, we've disposed of stores generating $900 million in revenue that did not fit our success profile. In addition, we're executing on some outstanding acquisitions that will help drive growth well into the future. To close, we're managing the Group 1 business for the long-term durable value creation and making capital investment decisions that will have positive impact for years into the future. We're executing our cluster strategy and leveraging our customer data better than ever. And I'm confident that our modifications to aftersales will bear fruit for a long time into the future. I'm excited about the changes we've made and look forward to our team's continued hard work. I will now turn it over to Daniel McHenry to talk about the financial details of the Hennessy transaction and our significant progress in the U.K. under his leadership as CEO, and our second quarter financial results. Daniel?

Thank you, Daryl, and good morning, everyone. As you heard from Daryl, Hennessy is a unique opportunity with a clear strategic fit and one that we expect to be immediately accretive to EPS. Given that, we are comfortable temporarily operating above our target rent-adjusted leverage ratio. At closing, we expect our rent-adjusted leverage ratio to be under 4x, still significantly below our credit facility covenants. With strong cash generation of our business and continued portfolio optimization to dispose of underperforming and lower volume stores, we plan to return to our target leverage by mid- to late 2027. In the second quarter of 2026, Group 1 Automotive reported revenues of $5.4 billion, gross profit of $861 million, adjusted net income of $115 million and adjusted diluted EPS of $9.61 from continuing operations. Starting with our U.S. operations. Our second quarter results reflected continued affordability pressures and a more normalized margin environment compared to the exceptionally strong prior year period. Throughout the quarter, we remain focused on areas within our control, improving execution, reducing costs and preserving profitability. New vehicle unit sales declined on both a reported and same-store basis, reflecting ongoing affordability concerns, inventory pressure on certain brands and a difficult year-over-year comparison. New vehicle GPUs decreased sequentially from $3,313 to $3,260 but remain consistent with quarter 4 2025 level. In used vehicles, lower retail volumes were partially offset by higher average selling prices. Gross profit per unit remained under pressure as acquisition costs and sourcing competition persisted. We continue to leverage our scale, data analytics and disciplined inventory management to improve sourcing and position the business for stronger performance. F&I profitability remained resilient with gross profit per unit essentially flat compared to the strong prior year quarter, demonstrating continued consistency in our sales process. Aftersales continued to provide stability to our earnings. As Daryl discussed, we continue to optimize our collision footprint by reallocating capacity towards traditional service work where we see stronger long-term results while also closing collision centers that did not meet our return thresholds. This resulted in a 15% decline in same-store collision revenues. Additionally, aftersales gross profit was negatively impacted by the lower internal reconditioning associated with the declines in used units. However, same-store customer pay and warranty revenues increased approximately 4% and 1%, respectively, with corresponding gross profit improvement of approximately 3% and 4%. This revenue growth is strong against tough warranty comps that were up 32% from the previous comparable period, which included Tundra and GM engine recalls. In addition, our technician recruiting and retention initiatives continue to generate results with same-store technician headcount increasing 2% year-over-year. While our U.S. results were below our expectations, the operational and cost actions implemented earlier this year are beginning to improve efficiency, and we remain focused on strengthening the operating performance in the quarters ahead. Turning to the U.K. I'm proud to be leading our U.K. operations and encouraged by initial early progress. Our U.K. business continued to demonstrate resilience despite a competitive operating environment. New vehicle performance remained solid, supported by higher same-store volumes, which was up nearly 4% with a stable gross profit per unit. Used volumes remained under pressure. While same-store revenues declined modestly, we remain focused on balancing volume and profitability as market conditions evolve. Aftersales and F&I continued to build momentum, delivering year-over-year growth in both revenues and gross profit on a same-store basis. These businesses remain central to our strategy of improving earnings quality in the U.K. as we continue to leverage proven operating practices from our U.S. operations to improve the long-term performance. Same-store technician headcount increased 2%, adding value capacity to support future growth. On expenses, same-store SG&A as a percent of gross profit on a year-to-date basis was in line with our target at 80%. We have also started relationships with Chinese automakers and opened our first Geely franchise in June, with additional locations expected later in the year. We acted to sell 4 of our underperforming JLR stores as we previously committed to do so, which generated approximately GBP 50 million. Across both markets, we continue to focus on improving execution, reducing costs and increasing operational efficiency while positioning the business to deliver stronger returns over time. Turning to our balance sheet and liquidity. Our balance sheet remains strong, providing financial flexibility to continue executing on our disciplined capital allocation strategy. As of June 30, our liquidity of $684 million was comprised of accessible cash of $322 million and $362 million available to borrow on our acquisition line. Our rent-adjusted leverage ratio as defined by our U.S. syndicated credit facility was 3.3x at the end of June. On a pro forma basis, reflecting the 2 dispositions completed in July, it would have been 3.2x. Cash flow generation year-to-date 2026 yielded $211 million of adjusted operating cash flow and $118 million of free cash flow after backing out $93 million of CapEx. This capital was deployed in the same period through a combination of acquisitions, share repurchases and dividends, including the acquisition of $340 million in revenues through June 30, $72 million repurchasing 205,190 shares at the average price of $353.08 and $13 million in dividends to our shareholders. During the second quarter 2026, we elected to hold cash ahead of the Hennessy acquisition while also preserving flexibility to optimize leverage. We currently have $306.3 million remaining on our Board-authorized common share repurchase program. For additional detail regarding our financial condition, please refer to the schedules of additional information attached to the news release as well as our investor presentation posted to our website. I will now turn the call over to the operator to begin the question-and-answer session. Operator?

[Operator Instructions] Our first question today comes from Mike Ward from Citigroup.

Whenever you talked Hennessy, it sounds like that's a premium acquisition. So I assume it's got a premium price. Can you talk a little bit about financing it? And it sounds like if these brands aren't meeting those -- or the stores aren't meeting the profile, you're going to be selling some. Can you quantify any of that? And is that some of the way you're going to be paying for Hennessy? Is that what you're looking at?

Mike, this is Daryl. I'm going to answer part of your question, and then Daniel will take the rest of it. We are going to -- as you've seen over the last year or 2, we're working towards having more cluster markets, high revenue, premium brands, and that's what we're moving towards. And we've executed against that over the last 2 or 3 years on the buy side and the sell side. And we're going to continue to do that. We have identified some dispositions that we're working on, and we'll have more to talk about on that in future months. These are premium brands. They are premium stores. EBITDA margins are excellent. But we are really happy with what we paid for these stores, especially compared to what we have seen in other transactions that we've either been bidding in or have learned about. And so we're really pleased with the valuation and what we paid. And then Daniel will speak to the other questions you have, Mike.

Mike, it's Daniel. Regarding the purchase price for the Hennessy acquisition, it was approximately $1.3 billion made up of $1 billion in goodwill, just over $200 million in freehold property or purchased assets and $100 million in other assets. That's going to be funded by long-term debt. The plan is to go to the bond market in quarter 3 to purchase that, while in the meantime, there's a 364-day bridge loan in place to purchase the asset. You are correct in what you say around the dispositions. Plan is that there will be some dispositions quarter 3, quarter 4, and that will go towards paying down some of that debt.

Okay. And should we think about half and half dispositions and debt funding?

I think that's a fair estimate.

Okay. On the $50 million cost savings that you identified that you completed, is that all in the U.K.? And when will we see the full benefit of that?

U.S., it's in the U.S. Yes. Let me give you an example of that. We took out -- we wanted -- we targeted 700 people. We got north of that, and we targeted $50 million. Just let me give you an example that I think quantifies it really, really well. Personnel costs, gross margin between Q1 and Q2 on a same-store we were up $4 million, but personnel cost was down $17 million. So we generated more gross on $17 million less in personnel costs. So multiply that out over 4 years and you get north of $50 million easy. And that's just the people cost. We took a look at some other parts of our business, too, Mike. So we were pleased with the execution on that.

Mike, it's Daniel. Just to put it in perspective, if the SG&A in the U.S. has remained at the same level as it was in quarter 1 as a percent of growth, we would have an extra $19 million of cost in our business.

And does this cluster strategy help on the cost front as well?

It helps. Yes, we see better SG&A leverage in our larger -- the larger the cluster market, the better SG&A leverage we get. And it's due to a variety of things, but yes.

Our next question comes from Jeff Lick from Stephens Inc.

Daryl and Daniel and whoever else, I guess we could just drill down on -- you highlighted a couple of different items in the U.S. that might be driving short-term sales pressure, talked about the branding dynamics. I'm just curious if you maybe force rank if you start with same-store new down 5%, the market was kind of flat. What attribution would you give to the branding and the traffic, short-term traffic issues versus other factors? And then we've always tried to use the new same-store sales as a proxy for what used should be because of the trade-in factor. Obviously, that was quite a bit below. Maybe you can just put a little more meat on to that bone as to what kind of drove the variance between the used and the new.

Sure, Jeff -- Daryl. I would say maybe 2/3 of the 5% is due to the bumps, the transitional issues around rebranding and organic search associated with that, et cetera. I do think -- we get questions on Texas quite a bit. And I do believe gas prices is changing the mix of what's being sold today. You can see it in full-size truck mix and full-size SUV mix. And when you look at our mix, 80% of our Ford and GM business is in Texas. And so I think that affected it to some degree. And then, yes, we didn't get as many trades because the new car volume was down. But we also need to do a better job on appraisals and capturing those trades. We saw that ratio drop a little bit in the quarter more than we would like to see it. It's getting harder to source vehicles organically just because there's more negative equity out there. But we feel like we can up our game on the sourcing, and it's really around our appraisal practices. And we try to really keep our stores from going heavy on auction cars, especially this time of year because the values drop in about 60 days from now -- 30 days from now. So those are the things that we really need to do a better job of. And we're making some progress already on that. But that's -- those are things that we really need to. I guess on the new car and the used car side, if you think about Group 1 and our history, we've always driven new and used car volumes really well. There was a time not too long ago when our used to new ratio was 0.7:1, and we got it up to 1:1 end of last year and then our sales efficiency of our stores, which is an OEM metric on market share. It used to be -- about 5 years ago, our stores were -- average Group 1 store was 94% sales efficient, which is 6% below average. And today, our average store in the U.S. is 109% sales efficient. So there's -- that's the incrementality. That's measured against other dealers in the same brand. So we've had success driving sales volumes in new and used, and I feel like that's a core competency at Group 1. And we certainly struggled with it in Q2, though.

And then just a follow-up on the rebranding and the consistent branding or the consolidated branding. As you think about the Boston market because I think you're looking at that in the fall, you've got some pretty well-established brands in Prime and IRA. Has this -- has the Texas experience made you rethink this? And would you do the same like Hennessy is a pretty well-known brand in Atlanta, would you change that as well? I mean, what are your thoughts there in terms of -- have you thought about maybe just taking a pause on this and how Texas works out?

Well, we're -- we want to do it well instead of fast. I will tell you that. That's important. And we are learning from every market we've rolled out. And we look at some markets that like El Paso and Lubbock, which are fabulous markets for us, and they've gone great. They tend to be more single point markets, but they've gone really, really well. And then other markets that are a little more competitive, we have to lean in more on paid search and other supplemental advertising through the transition period. And so -- and we'll do that in the other markets. We are committed to rebranding all the stores in the U.S. And we just feel like we can get a much better, more efficient use of our ad spend, marketing spend, reach more customers that way by having all the stores the same name. And most customers buy from the store closest to them and service at the store closest to them. And the most important name on the store is the OEM brand and the location. So yes, we're still committed to it. Absolutely. We feel like these issues that we're seeing are transitory. And we feel like we are learning from it, and we are going to continue to adjust as we go. And there's no -- absolutely no consideration to not continue.

Our next question comes from Alex Perry from Bank of America.

Actually just wanted to start there and dig a little bit more on some of the rebranding. I guess maybe any metrics you could share on the sort of rebranded stores versus non sort of how you expect or how have comps trended after the transition period? And then maybe talk through sort of any savings or efficiency impact that you sort of expect from the better marketing leverage?

Well, let me give you an example in Houston. We had -- I think we had 5 different brand names on stores in Houston. We had Sterling McCall. We had Advantage. We had Beck & Masten. We had others. We spend $1 million a month in marketing in Houston. And we can use that $1 million on 1 brand name or on 5. And we can certainly get better leverage out of that $1 million on 1 brand than 5. And so that's certainly how we expect to get the leverage on it. And when we look at what we ran into, like, again, in Houston is we own the Ford store and the Toyota store and the BMW store all within 3 or 4 miles of each other, and customers didn't know the same company owned all of them. And then how do you market to that customer about their Ford F-150 and their BMW, they own both of them. And so the share of garage and as we get further into it, we will share more of that data. We are already seeing evidence that we are capturing a larger share of the garage. It's too early for us to talk about that, but we are really, really pleased with the early results of that metric, which is one of the key ones that we have in our cluster markets.

That's really helpful. And then I guess my second question, I wanted to shift and talk through the parts and service business. I guess how should we be thinking about parts and service from here? Do you think we return to that mid-single-digit percent sort of run rate in the back half? Or is that going to be more difficult with some of the dynamics you mentioned in the prepared remarks around depressed SAAR and some of the impact of those higher RO orders? Maybe just talk through how you're thinking about parts and service.

Well, we think parts and service is still a great business. It still is -- there is an unlimited amount of parts and service business in our mind. It is more competitive today because of those issues I brought up in my prepared comments. That just means we have to adjust and be more competitive. As franchise dealers were not always known as the most affordable choice, and that's really, really important to customers right now. So especially those ones that are coming out of warranty high defection points. So we've got to adjust our approach there. And so even with these changes in the market, it's important that we understand that so we can adjust our approach. But when you think about even just the decline work coming through our dealerships, it's in the millions and millions and millions and millions, many tens of millions of dollars per month that customers decline after their vehicle is inspected. And so there's a lot of work that's still out there to capture. We just have to be smart about getting it. And warranty attachment, I touched on that a little bit. As the warranty business goes, our experience when we were seeing heavy warranty comps a year or so ago was there's -- on every 3 warranty ROs, there's CP line. So you get some -- we feel like we get some incremental CP business when there's a lot of warranty. So it will fluctuate to some degree based on that. But I don't know that we'd be able to say we'll be back to high single digits. I feel good about our 4% CP growth in the quarter and feel like we still have room to run there. And we still believe that aftersales is just a great opportunity in our business.

Our next question comes from John Babcock from Barclays.

I guess just quickly following up on that on the parts and service side of things. I mean, earnings were down a little bit from last quarter, and I know you talked about competition. Is there anything more you can provide in terms of what drove that? Because it seemed like the gross margin was generally fine. So I'm just wondering if there were any cost factors or anything of the like that maybe we should be taking note of here.

Are you talking about parts and service?

Yes, parts and service. Sorry, I don't know if I clearly didn't specify that, yes.

That's okay. That's okay. I don't -- I mean, there's a little mix shift going on with warranty and CP and collision and wholesale parts right now. We were -- we ran some promotional stuff in the quarter, which you're going to see a little different margin in warranty and CP because CP, you tend to discount some. In warranty, it's full labor rate with the OEMs. So as that shifts and we see a little bit of that right now, you will see the total margin percentage change through each quarter. And I think we saw some of that. And the collision business for us is down. And so that also affects our total margin. Daniel may have something to add.

I have nothing to add.

Okay. And then in terms of Texas, how are the volume -- how was the volume performance there in the quarter?

It was down for us. Daniel?

John, it was down in terms of new and used. As Daryl said earlier in the call, I think if you look at the market as a whole, the truck market was down virtually across every line for both GM and Ford. And I don't think that there was anything different about Group 1 in terms of the percentages down for the Texas market versus the market as a whole.

John, just to give you an example, our Texas business down 6% new. El Paso was up 6%. And then our -- the rest of our markets were down 3% to 8-ish kind of thing. And we have -- most of our domestic business that Group 1 owns in the U.S. is in Texas.

Okay. And then last question before I turn it over. On to the U.K. what's next in terms of what you would want to accomplish there over the balance of this year, whether it's more on the SG&A front, whether it's getting more of the Jaguar Land Rover stores off your books. If you could just talk about kind of the next actions from here, that would be helpful.

Sure. Let's talk about the Jaguar Land Rover first. The Jaguar Land Rover that we have disposed of so far this year, that were really the drag on earnings. And the portfolio that we're left with is the better half of the portfolio. So we'll continue to evaluate that as time goes on. Regarding key priorities, clearly, aftersales remains a key priority for us in the U.K. We've seen some good growth, I would say there over the last 12 months, still remains a priority. Our weak point still seems to be used cars. Some of that's just around the market there with EVs returning to the market after their first ownership cycle. We are really focused on our days supply there to try and keep the days supply at a minimum in terms of used vehicle because the market continues to evolve around used vehicle sales. Regarding portfolio optimization, I still think there's some work to do on our portfolio there, disposing of a couple of our remaining underperforming stores, and that will be done in the next couple of months.

I would add one thing to that, that we were really pleased with the new car same-store growth in the U.K. We're up 3.9% in the quarter, which was higher than the general market. And we don't have Chinese brands in that number to any great degree at all. So it was on our legacy brands that, that sales increase happened. Really pleased with that on good margin.

Our next question comes from Rajat Gupta from JPMorgan.

I just wanted to follow-up and clarify on a couple of things mentioned before. Just on the last one on dispositions. I was surprised to hear that half of the acquisition funding will come from just the disposition proceeds. I mean, it seems like a pretty big number. Any way you can size what kind of EBITDA or revenue impact we should see from those underperforming stores that you plan to dispose? That would be one. And I have a couple of follow-ups.

Rajat, it's Daniel. The EBITDA that we would expect to see from those underperforming stores would be less than half of the EBITDA that we would expect to be generated by the new stores. A number of the stores that we have in the disposition list are at APA stage or LOI stage. EBITDA from those stores is fairly low, I would say, because they do tend to be the smaller stores. Regarding the exact amounts, we're not in a position to give that at this moment in time.

Understood. That's helpful. And then just a follow-up on the parts and services comments with the car park turning over from the low SAAR period. I mean, I think the way you described it, I mean, should we anticipate maybe the gross profit trajectory or the margin trajectory maybe taking a step back over the next few quarters before it starts to grow again as you adjust? I'm just curious how we should read those comments in terms of like just near-term performance.

What we find is if we are able to capture customers generally through a maintenance offering, our average dollars per RO give us good gross margin retention and good dollars per repair order. And we saw that with our $17.76 promotion in June, and we have seen that historically, when we have run things like our Saturday service events, we see the exact same pattern. And so we find when we focus on capturing those customers through maintenance offerings, the average mileage of a customer coming -- of a car coming through Group 1 store is 68,000 miles. And it's a year older than it was a year ago, which there's a lot of work to sell on those kinds of vehicles, that age. And that's also one of the reasons we're trying to put more emphasis and focus on service advisor skills, is to do a good -- a better job or a good job trying to capture that work.