Good morning, ladies and gentlemen. Welcome to Group 1 Automotive, Inc.'s First Quarter 2026 Financial Results Conference Call. Please be advised that this call is being recorded. I would now like to turn the floor over to Peter C. DeLongchamps, Senior Vice President, Manufacturer Relations and Financial Services. Please go ahead, Mr. DeLongchamps.

Thank you, Jamie, and good morning, everyone. Welcome to today's call. The earnings release we issued this morning and a related slide presentation that include reconciliations related to the adjusted results that we will refer to on this call for comparison purposes have been posted to Group 1 Automotive, Inc.'s website. Before we begin, I would 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 call, statements made by management of Group 1 Automotive, Inc. 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, market conditions, 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 are Daryl Kenningham, our President and Chief Executive Officer, and Daniel McHenry, Senior Vice President and Chief Financial Officer. I would now like to hand the call over to Daryl. Thank you, Daryl.

At Group 1 Automotive, Inc., we pride ourselves on performing effectively in challenging times. We have successfully navigated economic recessions, the COVID pandemic, and the CDK outage in 2024. We focus on what we can control and by remaining a pure-play retailer, we minimize distractions and remain focused on what we feel are our core competencies. We estimate that Q1 2026 weather impacted our results by about $7 million in gross profit, driven largely by our aftersales business. Important to note is that Group 1 Automotive, Inc. typically pays our employees during weather closures, and in some markets, our stores were closed for as long as a week this year. In 2026, we continue to focus on our strengths. Where our performance did not meet our expectations, we acted promptly to address those issues, and I will provide further details on those areas later in my remarks. In the U.S., our new vehicle margins remained robust at over $3,300 per car, exceeding $3,250 for the third consecutive quarter. We saw sequential improvement in used vehicle PRUs and a $95 same-store year-over-year increase in adjusted F&I PRU. Two years ago, we introduced a virtual F&I process in our U.S. stores, giving customers the opportunity to conduct their transactions with an agent. This innovation is now installed in one-third of our U.S. stores, doing 20% of our deals in those stores. We are very pleased with the results of virtual F&I. Our PRU results are strong, transaction times have improved, improving customer convenience and the overall experience. Thus far, customer feedback is very positive. In addition, compensation costs are lower compared to our in-store transactions. We anticipate continued growth in virtual F&I through the remainder of this year and into 2027. In aftersales, we are committed to setting ourselves apart. This quarter, we increased same-store customer pay gross profits by nearly 6%. We are pleased that in our U.S. business, our customer pay repair order count rose by 2.5%. Our growth in aftersales is driven by marketing initiatives utilizing artificial intelligence, vertically integrated customer data management, decreased technician turnover, completion of our workshop air conditioning project, and the addition of 130 new technicians on a same-store basis. Turning to a progress update on our Group 1 U.S. store rebranding initiative, we successfully completed the rebranding of half of our U.S. stores and anticipate being complete by the end of the year. Our team is actively gathering insights from each converted market, allowing us to refine our approach and apply our learning as we go. In the long term, we believe rebranding will improve the effectiveness of our marketing investments and drive greater customer retention, particularly as we focus on engaging households under the Group 1 Automotive, Inc. brand, especially in cluster markets. Our U.K. operation is demonstrating notable progress across key segments. New vehicle margins remain steady year over year, while same-store volumes increased 2%. Same-store used volumes rose nearly 5%, accompanied by sequential PRU improvements. F&I continued its positive trajectory, up year over year and sequentially on a same-store constant currency basis. Our U.K. parts and service business continues to accelerate, increasing 20% year over year in same-store gross profit, and customer pay increased 18%. We are applying many of the same principles we use in our U.S. business, opening our workshop schedules, expanding our hours, pricing our maintenance offerings on the aftermarket competition, eliminating diagnosis fees, and increasing capacity by hiring technicians. Turning to our U.K. SG&A performance, we incurred $3 million in incremental costs due to government-mandated national insurance and minimum wage increases. Without this headwind, we improved our leverage, but we continue to focus on further efficiency there. In the U.S., SG&A performance did not meet our expectations. Consequently, in early April, we implemented cost reduction measures in our U.S. business, cutting our headcount by nearly 700 full-time employees, and reducing SG&A costs by approximately $14 million through contract and vendor elimination. We expect that these efforts will remove $50 million of annual costs from our U.S. operations that will return our SG&A leverage to a more acceptable level. In both markets, across all areas of our business, we continue to look for ways to leverage technology, including artificial intelligence, to improve our returns. Many of these investments are still in the early stages, but they are beginning to demonstrate real benefits. AI can support customer acquisition and retention, enhance inventory optimization through more informed sourcing decisions, drive efficiencies by digitizing processes to reduce SG&A, and put more consistency in performance across all of our rooftops, a key strategic focus for Group 1 Automotive, Inc. We will continue to drive these efforts and look forward to sharing more details in the future. In the first quarter, we also continued our commitment to disciplined capital allocation, particularly in M&A and share buybacks. We divested two Mercedes-Benz dealerships in California. These stores were high-cost operations with significant real estate and operating constraints. In the U.K., aligned with the Volkswagen Group's ideal network plan, we acquired one Škoda and two Volkswagen dealerships while also disposing of one underperforming Volkswagen and one underperforming Škoda dealership. And in the U.K., we finalized a framework agreement with Chinese OEM Geely and will open three Geely dealerships in Q2 in facilities that we already own. We are in additional discussions with Geely and other Chinese OEMs about further representation. Our primary intention is to develop direct understanding of the retail model of Chinese brands. We also believe there is significant profit and sales opportunity with these brands in leveraging our large corporate fleet business in the U.K. During the quarter, we repurchased 205,190 shares, or approximately 1.7% of our outstanding shares. We are managing the business with discipline and purpose, ensuring we deliver strong, resilient performance that our shareholders expect, even in today's dynamic environment. I will now turn the call over to our CFO, Daniel McHenry. Thank you, Daniel, and good morning, everyone.

In Q1 2026, Group 1 Automotive, Inc. reported revenues of $5.4 billion, gross profit of $878 million, adjusted net income of $104 million, and adjusted diluted EPS of $8.66 from continuing operations. Starting with our U.S. operations, first quarter performance remained solid across most businesses, despite continued pressure on volumes and margins. New vehicle unit sales declined both on a reported and same-store basis, reflecting not only ongoing affordability concerns, but a tough comparative period which saw elevated new vehicle sales ahead of tariffs. However, new vehicle GPUs increased sequentially from $3,260 to $3,300. We continue to maintain strong operational discipline through effective cost management and process consistency. In our used vehicle operations, in line with the broader market environment, used vehicle retail units declined both on a reported and same-store basis, which were partially offset by higher selling prices. GPUs declined approximately 3% on a same-store and as-reported basis, reflecting continued pressure on vehicle acquisition costs in a more competitive sourcing environment. We continue to leverage our scale and operational flexibility to strengthen used vehicle acquisition while executing disciplined sourcing and pricing in a dynamic used vehicle market. Our first quarter adjusted F&I GPUs were up nearly 4% on an as-reported and same-store basis versus the prior-year comparable period. Aftersales stood out as a key bright spot, with both parts and service gross margin reaching a new quarterly high. Gross profit continues to benefit from our efforts to optimize our collision footprint, shifting collision space opportunistically to additional traditional service capacity and closing collision centers where returns do not meet our requirements. Same-store customer pay and warranty revenues increased approximately 35%, respectively, with corresponding gross profit growth of approximately 69%. Our technician recruiting and retention efforts continue to pay off, with same-store technicians up 3% year over year. Overall, our U.S. business continues to demonstrate resilience, with strong aftersales performance and disciplined execution helping offset ongoing normalization in vehicle margins. Turning to the U.K., while the U.K. remains a challenging operating environment, performance improved across several key areas. New vehicles performed in line with expectations. Used vehicle same-store revenues were up over 6% on a local currency basis, with volumes up nearly 5%. Same-store GPUs declined 2% on a local currency basis, leading to an increase in same-store used vehicle gross profit. Performance reflects improved demand and throughput, despite continued margin pressure in a competitive used vehicle market. Aftersales delivered year-over-year growth in both revenue and gross profit on an as-reported and same-store basis, while F&I delivered year-over-year growth in revenue and gross profit on a same-store basis. The aftersales business remains an important stabilizer within the U.K. operations, and along with F&I, it is a key area of focus as we work to enhance profitability by bringing best practices from the U.S. Same-store technicians are up 3%, adding significant capacity to our shops. Same-store customer pay and warranty revenues were up over 612% year over year on a local currency basis. Same-store F&I PRU reached 1,128, with an as-reported and same-store PRU both increasing over 8% year over year. We are continuously taking decisive actions in both the U.S. and U.K. to control costs, strengthen operational efficiency, and position the business for improved returns as market conditions stabilize. Turning to our balance sheet and liquidity, our strong balance sheet, cash flow generation, and leverage position will continue to support a flexible capital allocation approach. As of March 31, our liquidity of $714.3 million was comprised of accessible cash of $191 million and £523 million available to borrow on our acquisition line. Our rent-adjusted leverage ratio, as defined by our U.S. syndicated credit facility, was 3.09 times at March 31. Cash flow generation year to date yielded $147 million of adjusted operating cash flow and $95 million of free cash flow after backing out $53 million of CapEx. This capital was deployed in the same period through a combination of acquisitions, share repurchases, and dividends, including the acquisition of $135 million of revenues through March 31, $72 million spent repurchasing 205,000 shares at an average price of $353.08, and $7 million in dividends to our shareholders. 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 the investor presentation posted on our website. I will now turn the call over to the operator to begin the question and answer session.

We will now open the call for questions. To ask a question, you may press star and then one on your telephone keypads. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, you may press star and two. We ask that you please limit yourselves to one question and one follow-up. At this time, we will pause momentarily to assemble our roster. Our first question today comes from Alex Perry from Bank of America. Please go ahead with your question.

I was wondering if you can walk us through the cost savings plan in more detail. It looks like $50 million in annualized savings with benefits beginning in the second quarter. Maybe help us parse out what the expected second quarter benefit is and what we should expect in the back half as well. And just provide a bit more color on the overall plan. Thank you.

Alex, hi. It is Daniel here. I would say coming out of January and February, we could see some weakness in the market and our SG&A leverage at that point was much lower than we would have expected. Going into March, we developed a cost-cutting program: 700 heads to come out of the business. They have all been completed by April. Total cost effect of that headcount reduction is approximately $35 million. In addition to that, we have taken cutting exercises around contracts, as Daryl talked about earlier, and that is close to $15 million in terms of cost. So on an annualized basis, or a quarterly basis, we would expect that to be about $12.5 million a quarter. Now, what would that have done for us in quarter one if we had taken that cost out on January 1? U.S. SG&A was circa 70.5%. We would have expected that to have been about 68.5%. So it is about 200 basis points out of cost in the U.S. Additionally, we continue to take cost out in the U.K., but we do have that additional national insurance in quarter one that we did not have last year.

Really helpful. Thanks for all the color there. And then my second question is about the used business. What is the path to getting used profitability back up to historical levels? I know you mentioned some of the sourcing cost on the used side, but maybe talk through the path there and if we should expect any near-term improvements on the used GPUs. Thanks.

This is Daryl. We saw some nice sequential improvement in used PRU. Sourcing is the big challenge right now, because the SAAR was depressed in the first quarter, so there were fewer trades. We ended the quarter with 26 days. We do not rely very heavily on auctions—11% of our sourcing comes from auctions—so we work hard on organic sourcing. But the problem there is it is heavily late-model vehicles. Our mix of cheaper, higher-margin used cars in our inventory is very light compared to what it has been historically, and everybody is scrambling for those. Everybody really wants those because, obviously, one of the reasons people buy used cars is because they are more affordable. As we get better at that, I expect we will see margin improvement. I think we are better and more disciplined in our inventory acquisition. We are much better and more disciplined in both the U.S. and the U.K. on aging management and pricing decisions to market, trying to use more technology in both markets. While I do not think you will see leaps and bounds of improvement, I do think the additional discipline and the lack of supply provides a floor on used car PRUs.

Incredibly helpful. Best of luck going forward.

Thank you.

Our next question comes from Bret Jordan from Jefferies.

Hey, good morning, guys. This is Patrick Buckley on for Bret. Thanks for taking our questions. There have been some recent headlines around rising negative equity values. Have you seen similar trends with your customers? And has there been any impact on converting a potential customer to a buyer on the sales floor when they realize they have to write a check to make the transaction happen?

The short answer is yes. Negative equity is high and can be a headwind. We watch affordability measures quite a bit. The average car payment is high, insurance rates are high, negative equity is high. But there is also evidence that affordability is actually a little better now than it has been in some time. When you look at car payments as a percentage of people’s salary and people’s pay, it actually takes fewer weeks on the measure that a lot of people watch. It is better in 2026 than it has been. So there are a lot of things going on with affordability right now. Negative equity is one piece of that puzzle. Things like tax rebate checks are another piece. I do not think it is a huge limiter; it is just another piece of the affordability puzzle now.

Great. That is helpful. Then focusing on the U.K., there has been a more prominent impact from recent energy spikes there. How has the consumer held up into Q2? It sounded like Q1 was a pretty healthy quarter from a demand side. Have there been any signs of a pullback more recently?

One of the things that we were really pleased with in the U.K. in the first quarter was our order take rate going into the plate-change month in March—it was very high, higher than we had seen in several years. When you go into a plate-change month, you really know how it is going to come out by about February, because the order bank dictates what kind of volume you are going to do. We were really pleased all through January and February with our March order take. I do not see that has changed materially. On a relative basis, April is not a plate-change month, but on a relative basis, I do not see that has changed. One thing we are really pleased about going into the second quarter in the U.K. is the health of our used car inventory. Inventory is significantly better than it was a year ago. One of the challenges in the U.K. market is when you have two months—March and September—which drive so much of your new car volume, it creates these huge used car inventories in April and October. If you do not have a lot of discipline in the way you manage your used car inventory, you can get caught, and candidly, in the past, we have been caught. I am really pleased with our aging, our inventory levels, and our discipline this year in the U.K. Our used car inventories are in a much better place, and we hope that means better things for us in used cars this year there.

Great. That is all for us. Thanks, guys.

Our next question comes from John Babcock from Barclays. Please go ahead with your question.

Thanks for taking my question. The first one, on your plan to exit the JLR brand, where does that stand, and also, did that impact your U.K. operations, or is that now considered part of discontinued ops?

It is not discontinued ops because, materially, it is a very small part of our business. We are in active negotiations on a number of them, both with the OEM and with potential buyers. We have closed one of the nine. We are in active discussions on several more and very close to contract finalization. Once we get those finalized, we will be able to announce those, but we are pleased with where we are on that.

And then just back to the cost actions. With the 700 people that you cut from the workforce, where were those? I am sure they are spread across different teams, but were those more weighted to the sales side, or more in the back office? Any more color would be useful.

It was across the board. We took SG&A as a percentage of gross targets by store, market, and business unit, and assigned headcount targets based on that. It came from across the enterprise—in the stores and at the corporate level. Fortunately, in some of our corporate activities, we have been able to implement technology which helps keep our productivity up, so we did not need some of that headcount. It was across the board, and that is done. We have already executed the headcount actions.

Understood. Are you able to provide any split between U.S. and U.K.?

That is all U.S. It is Daniel here. The full $50 million was all U.S. headcount reduction.

Thank you.

Our next question comes from Rajat Gupta from JPMorgan. Please go ahead with your question.

Great, thanks for taking the question. I had a follow-up on the disposal question. The California stores that you divested—could you give us a sense of proceeds and any EBITDA or earnings impact we should dial in from that? I have a couple of quick follow-ups.

We do not typically disclose the proceeds. But it is fair to say the multiple that we received for those stores was much higher than the multiple that the company trades at. Both stores needed significant CapEx. They had fairly expensive real estate attached to them. For us as a company, we were pleased with the outcome for selling those stores.

Got it. That is helpful. And then on parts and service, thanks for calling out the weather impact. If I adjust for that, the U.S. business would have grown roughly 4% versus the 2% reported. How should we think about that in the context of your general outlook for mid-single-digit type growth? Maybe there is some warranty headwind. How should we think about that going forward?

There is a little warranty headwind. On a year-over-year basis, warranty was only up 4% for us in the U.S. The mid-single digits is still the model, Rajat. Two things to keep in mind with us. We have converted some of our collision centers into shop space. You cannot just turn that off one day as a collision center and turn it on the next day as a service workshop; you have to put all new equipment in there and restaff it. There is transition time between when it stops being a collision center and when it starts being a productive workshop. So you see a big negative on our collision comps because of some of those collision centers that we have closed. In addition, what we see in the sector is a decline in the collision business in general, which exacerbates that. You see that in our wholesale parts numbers that were only up 2.8%—not very much—and that is a lower-margin part of our business. You take the collision decline, which is a lower-margin part, and the slower growth in wholesale parts, and you mix that into CP and warranty, and you see a slower number on aftersales growth. We had almost 6% same-store gross profit growth on customer pay in the U.S.—pleased with that. I always want it to be more, but when we pull all of our aftersales levers, that is generally directed at customer pay. Hope that helps.

That is helpful. Just one clarification: the F&I adjustment of $6.8 million—what was that tied to?

That was effectively a one-time, nonrecurring adjustment to our revenue calculations for retrospective rebates.

Understood. Thanks for all the color. Good luck.

Our next question comes from Jeff Lick from Stephens. Please go ahead with your question.

Good morning. Thanks for taking my questions. Daryl, as you look at the first four months of this year, it has been pretty noisy. Could you parse out where you think the consumer is and maybe bifurcate the typical mass affluent or luxury consumer versus the volume consumer as we get through April? We have heard some of your peers say April has been okay but maybe feels a little weak, like people are being cautious because of the war. Curious for your thoughts on where things are at.

I would not disagree with what I have heard so far from our peers and some of the industry experts on the consumer. There is no shortage of distractions for consumers these days, and in our industry, consumer confidence and the SAAR run together. As consumers lack confidence, it is a headwind. I do think there is evidence that consumers are still spending. Ex-weather, we have seen some decent performance. But there is no shortage of distractions for consumers right now. That is one of the reasons we took the cost actions we did, Jeff. We want to make sure we are lean enough if the SAAR stays in this range—mid-15s, 15.6, 15.7—so that we are able to compete effectively.

And then just to follow up, on the 700 headcount, obviously in the back of your mind you are thinking, if we do this, it could come back to haunt us in terms of operational abilities on the cost side or on the gross margin side. Where might you worry you could be cutting to the muscle, as you think about the dealership of the future and functions that can be performed by software?

I do not think we cut muscle on this one. We tried to be very logical about it. Where we did touch what I will call “productive” people—those who sell and service vehicles—we focused on very low-productivity areas of our business. We are using a lot of technology in our sales department to manage customers, inbounds, leads, sales, and conversion. We feel like we have enough technology overlay to compensate for lower-productivity salespeople we may have separated with. On a technician basis, we touched very few technicians, and if we did, it was around very low-productivity roles. We have actually leaned into more technician investment during this period. There are things we did not touch: any of our people development initiatives, training initiatives, people retention initiatives, or our air conditioning project across our dealerships. We continue our technician mentoring program—three quarters of our hourly techs are part of a mentoring program now—which we feel is vital to retention and growth. We did not touch anything that impacts longer-term growth opportunities in aftersales.

Jeff, it is Daniel here. One typical example of where we cut costs: this quarter, Q1, we rolled out digital deal jacket across 100% of our dealerships. Effectively, deals are either signed online or are held online. Traditionally, we would have had a scanner in a dealership scanning roughly 100 pieces of paper that formed the deal jacket. Clearly, going 100% digital meant that that scanner was no longer required.

Scanner being a person.

Correct.

Okay. Awesome. Thanks for taking my questions, and best of luck in Q2 and the rest of the year.

Our next question comes from David Whiston from Morningstar. Please go ahead with your question.

Good morning. On the upcoming Geely U.K. locations, are they going to be standalone or in the existing Group 1 Automotive, Inc. footprint somewhere?

They are in buildings we already own, usually part of either a franchise that we have or in a cluster of dealerships that we have. As an example, north of London near Watford, we have a site with a BMW store where we had a MINI standalone store and a BMW standalone store. MINI is now part of the BMW operation, which left us an empty showroom and service facility on the same campus, and we were able to put Geely in there. So we do not have to sell Geelys and BMWs in the same showroom, and it gives us a separate facility we already own. There is no incremental CapEx to do that except for some minor imaging investment.

Okay, thanks. And then on the virtual F&I, I am trying to balance that it is great for efficiency and speed for the customer, but are F&I managers losing some opportunities here financially?

No, they are not. In fact, they are gaining because they become much more efficient. They are actually doing more deals at the store level. The key to this was customer convenience. As we perfected this, we have lowered turnover, lowered comp, and actually increased PRU on what I would call the bottom performers. This has been a terrific initiative that has paid off in multiple ways.

One way to look at it is the productivity of the F&I producers. Many of the folks who are virtual F&I managers for us used to work in our stores. They now are virtual F&I managers doing deals all over the country. In an average day, an in-store F&I manager might do three deals. As a virtual agent, they can do seven, eight, nine, 10—that is what we see. We are really pleased with that. We are able to attract a different type of employee because we can offer things like part-time work and working from home. It has taken us two years to get here—it was not simple. The team worked really hard through our learning process on this. It was a long ramp up; that is one of the reasons we have not talked about it until now. But we feel there are productivity gains as well as quality of life benefits for our team.

Thank you.

Our next question comes from John Sager from Evercore. Please go ahead with your question.

Hey, Daryl. Thanks. I wanted to dig into the divergence between the U.K. and the U.S. and where you think you might have more impact on SG&A cost savings over time. Is there basically more low-hanging fruit in one region or the other?

I do not think there is low-hanging fruit in any region, honestly. Since COVID, we have been pretty disciplined with our SG&A and I think we have demonstrated that. Our headcount is still lower than it was pre-COVID. In the U.K., there is still opportunity as we grow lines of business—we saw F&I grow, aftersales grow quite a bit, and nice same-store sales growth in new and pre-owned. We must ensure we contain cost as we grow. Whether it is marketing costs or people costs, some transaction costs, we do not have as much automation in our U.K. business as in our U.S. business. That is a focal area for us. In the U.S., it is about people productivity, whether it is a technician or a salesperson. How do we put them in a position to be as productive as possible? Those are areas we are really focused on in both markets.

John, one thing I would note in the U.S. specifically: January and February SG&A as a percent of gross was outsized, and some of that was around the weather we had in the U.S. March SG&A as a percent of gross was a lot healthier. With the actions we have taken, hopefully that will continue into Q2 and Q3.

That makes sense. Thank you very much. And then relative to the 84% in the U.K. for the full year '25, you had improvement in Q1. I would expect that to come back again in Q3. Could we end the year materially lower than that 84%, or is 80% still a bridge too far for this year?

The aim is to get as close to the 80% stated SG&A as a percent of gross as possible. On the basis of where we were in Q1, I think that is possible, but it will require consistent work.

Our next question comes from Mike Ward from Citigroup. Please go ahead with your question.

Good morning. I just want to double check the math. The $7 million impact from weather was all on parts and service in the U.S. Is that correct?

That is correct, Mike. That was our estimate, probably a little conservative. We assumed that all the vehicles sales we lost were replaced—whether that is true or not, who knows. But parts and service you are not likely to get back.

Okay. And if I do the walk, that $7 million was an 80-basis-point impact inflating the 70.5%. Is that right, Daniel? Is that what you were alluding to?

That is correct.

Okay. Then you have the cost savings which knock it down 150 to 200 basis points. I am assuming with the brand rollout there are some additional operating costs that are unusual as we go through this year. If we are at a steady state, are we getting down to somewhere in the mid-60s for SG&A as a percentage of gross in the U.S.? Is that the right way to think about it?

If you think about the walk and reverse the effect of the weather and assume we had the $12.5 million cost reduction, somewhere close to the high 67% is reasonable. That does not include any of the rebranding or other items.

On your question on rebranding, we did have some incremental costs—for signage, uniforms, and things like that—in the stores we have completed. One thing I was really pleased to see in March was real leverage on our operating advertising spend. We saw some really good leverage in March. Some of that is because it is March and you have more volume to spread it over, but also we are doing more with Group 1 Automotive, Inc. advertising than we ever have because we have about 50 stores on it. Rather than advertising 50 different brands, we can now advertise one and get more leverage. Hopefully, we will see that continue as we go through the year. We are trying to do more advertising with one voice rather than 148 different store voices.

Makes sense. Turning to the U.K., what is your current position with the China brands? I saw that you are expanding your relationship with Geely. How many stores do you have, what do they represent, and where are we going?

We have three that we have signed agreements with that will become live in Q2. We have a framework agreement with Geely so we can go beyond three. We have three stores with specific dealer agreements with Geely that will be operational in Q2. We are talking to Geely about more than three. We are also talking with other Chinese OEMs about representing them. We have taken a slightly slower pace. We were concerned some brands got over-dealered. We could have signed dealer agreements last year and been part of the sales growth, but it might have hurt profitability because the UIO is still growing. They have only done any real volume for six to eight months in the U.K., so there is not a lot of UIO yet to drive service departments. We are taking a measured approach, but we are in now and excited to learn how the retail model really works for Geely. We are in active discussions with some of the other brands. We will rely on our formula—we are good dealers, good representatives of OEMs, and they will want to do business with us. That formula has worked for us in both markets, and we feel like it will work well with the Chinese OEMs as well. Thank you very much, everybody. Appreciate it.

Thank you.

With that, we will be concluding today's question and answer session. I would like to turn the floor back over to Daryl Kenningham at Group 1 Automotive, Inc. for closing remarks.

Thank you, Jamie. In summary, we remain committed to our strategic initiatives: local focus, operating excellence, differentiated aftersales, and disciplined capital management. We will continue to build on our results from the first quarter. The U.K. remains a priority as we build on improving our operating performance, execute on our various initiatives there, and shape the portfolio to drive better returns. We believe consistent execution against these priorities positions us to navigate near-term challenges while also building long-term value. Thank you for your time today. We look forward to discussing our second quarter results on our call in July.

Ladies and gentlemen, this concludes today's conference call and presentation. Thank you for joining. You may now disconnect your lines.