Group 1 Auto CEO says the pandemic inventory crunch has been the ‘best thing’ for industry

The auto industry has skilled the coronavirus pandemic in two distinct chapters. Early on, it devastated gross sales and shuttered factories. Then, it spurred a surge in demand for new and used automobiles alike. For corporations like Group 1 Automotive, the finish consequence has been a reasonably good one, in keeping with CEO Earl Hesterberg.

“The auto distribution network had been stuffed with too many vehicles for almost a decade. What you’re seeing now is the system has been cleaned out and it’s now a demand-pulled system,” Hesterberg stated on CNBC’s “Power Lunch.” “I think having a tempered buildup in supply is the best thing that could happen to the entire industry,” he added.

Shares of Group 1 Automotive closed down 1.4% on Thursday after the Houston-based auto supplier reported third-quarter earnings that topped Wall Street expectations on the high and backside traces. Sales of $3.04 billion eclipsed the $3.01 billion analysts have been wanting for, in keeping with FactSet. Adjusted earnings per share of $6.97 beat estimates by 82 cents and represented an all-time file for the firm.

Another dealership chain, AutoNation, additionally reported file earnings-per share earlier this month. In each situations, the catalyst for the greater income proved to be faster-than-expected return of car demand mixed with decrease inventories as producers labored to ramp up manufacturing from coronavirus-induced plant closures. It interprets to greater gross sales costs.

“Our inventories are actually lower at the end of the third quarter than they were at the second quarter when it comes to new vehicles,” AutoNation Chairman and CEO Mike Jackson advised CNBC final week. “Industry inventories are still 25% to 30% below where they should be, if not even more, so it was challenging to adjust pricing to reflect the shortages.”

In Hesterberg’s view, although, the inventory crunch has not translated to a big lack of sale quantity. “Quite frankly, although we may miss a few sales, we probably missed less than people think,” stated Hesterberg, who has led the firm as president and chief government since 2005. He was beforehand an government at Ford Motor, which had a blowout earnings report after the bell Wednesday.

“We obviously have been surprised at the demand level through the pandemic but it seems to have some legs. What has really happened in our industry is the supply and demand balance has really been improved through this,” Hesterberg stated. “And that had benefits for our sector. But also I think you can see it in the auto manufacturer earnings that have been coming out in the last week or so.”

Shares of Group 1 Automotive are up 7.48% to this point in 2020. Since its pandemic-era closing low on March 18, the inventory has soared about 230%.

Source hyperlink

What do you think?

Written by Business Boy


Leave a Reply

Your email address will not be published. Required fields are marked *



Walmart pulls weapons, ammo off sales floors because of ‘civil unrest’ in some areas, but will still sell those items

Trump administration vetted political views of 274 celebrities for botched $265 million Covid ad marketing campaign, House lawmakers say