Sonic Automotive's record Q2 revenue, gross profit come with caveat
Sonic’s EchoPark brand of freestanding used-car stores continues to improve results.
Sonic Automotive Inc. set record second-quarter revenue and gross profit, even as the company called out lower-than-expected earnings triggered by profit pressures on new vehicles from certain brands.
Revenue for the fifth-largest public new-vehicle retailer increased 4.2 percent to $ 2.51 billion for the period, the company said Friday, while gross profit edged up 0.5 percent to $ 362.4 million on the strength of used-vehicle sales and finance and insurance gains.
The new-vehicle business was a different matter. Last week, Sonic warned that second-quarter profits were hurt by the mix of incentives from BMW and reduced incentives at Honda, particularly on the redesigned 2018 Honda Accord.
Sonic’s net income for the April-June period jumped 39 percent to $ 16.9 million. When adjusted for unusual items, Sonic’s net income from continuing operations fell 17 percent to $ 14.8 million from a year ago. The adjustments included charges for impairment, legal and storm damage and long-term compensation. Those were offset somewhat by gains from dealership sales and lease exit adjustments.
“The second quarter of 2018 fell short of our expectations as we experienced new-vehicle gross compression in several of our more significant brands. We anticipate this compression to carry into the third quarter of 2018,” Sonic CFO Heath Byrd said in a statement Friday.
Sonic’s EchoPark brand of freestanding used-car stores continues to improve results, Byrd said. EchoPark sold 7,459 vehicles during the quarter, and its revenue more than tripled from the year-earlier quarter. Sonic plans to open new EchoPark stores in Charlotte, N.C., and Houston in the fourth quarter of 2018.
Sonic shares rose on the news, gaining 5.3 percent to $ 18.90 in midday trading in New York
Records: Revenue and gross profit set second-quarter records. Used-vehicle sales, F&I gross profit per unit of $ 1,572 and F&I gross of $ 104.1 million were best results for any quarter.
Sales: New-vehicle sales fell 6.9 percent to 30,877. Used-vehicle sales jumped 17 percent to 35,779.
Same-store sales: New-vehicle sales on a same-store basis slipped 1.4 percent to 30,314. That compares with a 1.8 percent increase in new light-vehicle sales for the U.S. industry during the second quarter. Used-vehicle sales on a same-store basis increased 7.9 percent to 30,395.
Sonic Automotive, headquartered in Charlotte, N.C., is No. 5 on Automotive News‘ top 150 dealership groups based in the U.S., with retail sales of 133,728 new vehicles in 2017.
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