As Asbury Automotive Group chose to leave its standalone used-car store business, Sonic Automotive’s dedicated used-vehicle rooftops are adding so much to its performance that the company is expanding the segment.
Sonic highlighted on Friday that it retailed a record number of used vehicles during the second quarter, turning 30,536 units that contributed $40.0 million in gross profit.
Of that Q2 figure, Sonic’s standalone used stores — EchoPark — retailed 2,049 units, up 80.4 percent over the prior year quarter. As a result, Sonic announced that it is accelerating an expansion of an additional 15 EchoPark stores by the end of 2018.
“Given our performance at EchoPark, we are accelerating our expansion into the Carolinas, Florida, Georgia and Texas markets. Our Colorado stores were cash flow positive in the quarter. Currently, we have more than 15 locations in the aforementioned markets that will break ground in 2017 and 2018,” Sonic executive vice president of operations Jeff Dyke said in a news release.
Sonic shared plenty of other noteworthy accomplishments, including:
—All-time record quarterly fixed operations gross profit of $173.1 million, up 2.9 percent over the prior year quarter
—Record Q2 F&I gross profit and gross profit per retail unit of $86.9 million and $1,379, respectively
—Record Q2 total gross profit of $360.6 million, up 2.1 percent over the prior year quarter
On the new-car side, Sonic retailed 32,466 units during the second quarter, down from 33,229 units a year earlier.
“The new-vehicle retail sales environment continues to be challenging in Houston and across certain brands,” Dyke said. “Our exposure to BMW, coupled with economic conditions in Houston's energy corridor, pressured sales and profitability in the second quarter.
“On a same-store basis, our new vehicle unit sales declined 3.0 percent compared to the prior year quarter,” he continued. “This decline was slightly higher than the overall SAAR decline of 2.9 percent.”
Dyke then turned back to where Sonic thrived during the second quarter.
“Other parts of the business, however, continue to experience growth. We were able to grow used vehicle, fixed operations and F&I (finance and insurance) gross profit during the quarter, which is a testament to the dealer operating model,” Dyke said.
“In addition, our operations and financial management teams have been busy during the quarter adjusting our cost structure in various areas to compensate for increased competition that has pressured margins,” he went on to say. “We expect this highly competitive retail landscape to continue and possibly intensify over the next several quarters as dealers balance volume and gross per unit expectations.”
Sonic also reported that net income from continuing operations for the second quarter came in at $12.3 million, or $0.27 per diluted share. These results include charges related to fixed asset impairments, weather-related physical damage costs, legal matters, and charges associated with closing and relocating stores.
“Our activities in the quarter continue to support our long-term growth strategies,” Sonic chief executive officer Scott Smith said. “During the second quarter, we opened our new open point Audi store in Pensacola, Fla., and our sixth EchoPark store in Colorado. We believe these investments will offer strong earning streams as the underlying businesses mature.
“Year to date, we also invested approximately $30 million returning capital to stockholders through dividends and share repurchases,” Smith continued. “Our facilities teams have been extremely busy as well, evidenced by the $121 million invested in capital expenditures during the first half of 2017.
“We are committed to offering the best customer buying experience in the industry, which includes state-of-the-art facilities at both our franchised dealerships and EchoPark stores,” he went on to say.