Sonic Reports Recordbreaking Fourth Quarter
CHARLOTTE, N.C. — Sonic Automotive Inc. reported a series of highwater marks for pre-owned sales, F&I gross profit and fixed ops gross profit in the fourth quarter of 2016. In a Feb. 21 press release and investor call, executives with the nation’s fourth-largest auto retailer said those gains, coupled with a strong December, overshadowed losses in new- and used-vehicle gross profit.
“We are very proud of our team for how they handled these challenges driven by recalls, oversupply of inventory and softening in the Houston, Texas, market,” said Jeff Dyke, the auto group’s executive vice president of operations. “The December month was an all-time recordbreaking month for us and offset a weaker start to the quarter. We sold, grossed, serviced and profited more in December than in any month in our company’s history.”
The group reported sales of 29,621 pre-owned units for a gross profit of $41.5 million, both company records. Sonic also set new quarterly records for F&I gross profit ($88.3 million) and gross profit per retail unit ($1,363), as well as fixed-ops gross profit ($169.9 million) — a 0.5% increase over the prior-year quarter. Total gross profit for the quarter was $371.7 million, a 2.2% year-over-year increase and a new record for the company.
Executives also claimed a series of new annual records for 2016, registering all-time highs in used-vehicle sales (119,174), F&I gross profit ($343.3 million) and per-copy gross ($1,354), and fixed ops gross profit ($674.1 million). Total gross profit for 2016 was calculated at $1.429 billion, a 1% increase over 2015 and yet another new Sonic record.
The group registered those fourth-quarter and yearlong performances in the midst of two major, ongoing rollouts, both of which were launched in 2014. The first, One Sonic-One Experience, promises no-haggle pricing and an accelerated transaction process conducted by a hybrid sales and F&I manager. The second, EchoPark, is a series of new stores dedicated to offering market-dictated prices and hotel-level hospitality to used-car buyers.
Sonic introduced One Sonic-One Experience to its Birmingham, Ala., Chattanooga, Tenn., and Los Angeles stores and opened its eighth EchoPark location in 2016. The group’s executive team said they plan to aggressively expand both initiatives in 2017.
In response to an analyst’s question about escalating pay industrywide, Dyke pointed out that One Sonic-One Experience and EchoPark helped the group remain “fairly resilient” in the face of wage pressure.
“In the states that are pushing minimum wage up and putting a lot of pressure on us to change pay plans and the way that we pay, yeah, there could be some wage increase there. … EchoPark’s totally a salaried dealership group. All of our One Sonic stores are salaried. So our compensation’s very predictable when it’s like that.”
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