UPDATE 1-Group 1 profit drops amid U.S. auto slump

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DETROIT, July 29 (Reuters) - Auto retail chain Group 1 Automotive Inc (GPI.N) reported a nearly 29 percent decline in quarterly earnings on Tuesday as sales of new vehicles suffered from an industrywide slump.

The company, which ranks as the fourth-largest U.S. auto retail chain in terms of sales, also cut its forecasts for full-year earnings and for 2008 U.S. auto sales.

Group 1 expects to post earnings per share of $2.65 to $2.95 from continuing operations this year, down from an earlier forecast of $2.95 to $3.25.

Second-quarter net income fell to $17.2 million, or 76 cents per share, from $24.2 million, or $1.01 per share, a year earlier.

Same-store revenue fell 7.1 percent to $1.5 billion, hurt by a 9.9 percent decrease in new-vehicle revenues and a 5.8 percent decline in total used-vehicle revenues.

Group 1's parts and service revenues rose 4.8 percent, and finance and insurance revenues ticked up 0.6 percent. Same-store gross margin improved 60 basis points, to 15.9 percent.

The company cut its forecast for industrywide U.S. new vehicle sales to a range of 14 million to 14.5 million vehicles in 2008.

Also, Group 1 lowered its 2008 full-year capital expenditure estimate to $55 million from $60 million.