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SEC filingQ1 revenue declined 1.8% to $5.4B on new vehicle retail unit weakness, but operating income rose 3.7% to $242.6M and EPS expanded 12.2% to $10.85 through service growth and cost discipline.
Revenue decreased 1.8% year-over-year to $5.4 billion, primarily driven by new vehicle retail same-store revenues underperforming the prior year quarter due to a decrease in units sold. This reflects broader affordability pressures and inventory constraints, partially offset by higher pricing. U.S. new vehicle inventory dynamics contributed to supply limitations, while used vehicle inventory supply improved to 42 days, down five days from the prior year quarter, aiding retail positioning. Parts and service demonstrated resilience, with higher same-store technician counts resulting in increased customer pay repair orders compared to the prior year quarter. This stems from continued technician recruiting and retention efforts, enhancing capacity to meet rising demand and underscoring a strategic emphasis on recurring aftersales revenue.
Gross profit declined 1.6% to $877.9 million, with gross margin at 16.2%, while operating income expanded 3.7% to $242.6 million, yielding a 4.5% operating margin. This improvement highlights cost control and a favorable mix shift, including the strategic decision to reduce collision footprint in favor of higher-margin service business and enhanced shop efficiency. Net income edged up 1.6% to $130.2 million, supporting diluted EPS growth of 12.2% to $10.85, as profitability levers offset revenue headwinds.
Net cash provided by operating activities totaled $92.4 million, lower than $158.7 million in the prior year quarter, reflecting working capital needs such as inventory management. Capital expenditures increased to $84.0 million from $52.2 million, driven by construction and expansion of dealership facilities linked to acquisition activity, new manufacturer franchises, sales growth, relocations, and imaging programs. Free cash flow stood at $8.4 million. Management critically evaluates future capital spending in partnership with manufacturers to maximize returns. On an adjusted basis, investing activities benefited from higher proceeds from franchise and property dispositions, though specific cash impacts are noted in context of portfolio optimization.
These results demonstrate resilience through service outperformance and technician investments, positioning the company to navigate vehicle sales cyclicality. Liquidity remains supported by operational cash flows, cash on hand, and credit facilities to meet working capital, debt service, and operating needs. The focus on higher-margin service and disciplined capex aligns with long-term value creation in a dynamic automotive retail landscape.