While some public dealership groups are back shopping for dealerships, don’t expect Sonic Automotive Inc. to be on the hunt anytime soon.
Sonic, the nation’s third-largest auto retailer based on new retail units sold, intends to continue growing revenue by improving its existing stores.
The biggest push is on the used-vehicle business, where it has seen double-digit growth over the past three years. In its fourth quarter Sonic also saw a 20 percent gain in new-vehicle revenue and 18 percent in unit volume year over year.
Instead of spending money purchasing more dealerships, it is buying up its dealership real estate. Lease rates range from 8 to 11 percent, but Sonic says it can obtain 5 percent interest rates on commercial mortgages.
Sonic owned about 20 percent of its properties at the end of 2010, up from 14 percent in 2009 and up from zero when it shifted to owning from leasing properties in 2007.
In its fourth-quarter earnings call, analysts pressed Sonic executives to say when they might add to their store count. But quarterly revenues jumped 17 percent and after-tax profit on continuing operations soared 74.3 percent.
Wall Street usually likes to see 15 to 20 percent growth in annual revenues. If Sonic’s growth is sustainable, who needs acquisitions?