Sonic will add more stores; posts 48% rise in profit
Sonic's Scott Smith: "We’ve got roughly a third of the company’s revenues based out of California."
Sonic Automotive Inc. won’t close any dealership purchases during the first quarter, but company President Scott Smith still expects the retailer to acquire stores adding $500 million in annualized revenues during the balance of 2013.
Several conversations are in the works with potential sellers, Smith told Automotive News in an interview today after Sonic, the nation’s No. 3 dealership group, reported record fourth-quarter net income.
Smith aims to replace revenues lost by recent store divestitures. After selling five Oklahoma stores late last year, Sonic has 103 stores.
“It’s pretty safe to say we’d probably be in the half a billion range for ’13,” Smith said. “If we can grow at that pace, we can do it out of cash that we generate rather than raising debt or issuing equity and still maintain all the other initiatives we have.”
While Sonic won’t rule out new locations, it is primarily looking in the Sun Belt markets that already make up the bulk of its footprint. But deals are less likely to happen in California, where the company already has good exposure and where real estate acquisitions are challenging, Smith said.
“We’ve got roughly a third of the company’s revenues based out of California,” he said. “We’d be looking to diversify that a little bit.”
Sonic also is looking for brands with which it has done well. BMW, Mercedes-Benz, Porsche, Volkswagen, Audi, Honda, Hyundai, Land Rover, Jaguar and Ford have been named by Sonic executives as targeted brands.
Earlier today, Sonic reported a 48 percent gain in net income for the fourth quarter of 2012 on higher volume and gross profits. Net income for the quarter was $30.4 million, up from $20.5 million for the year-earlier period. Revenue for the quarter increased 10 percent to $2.2 billion.
After adjusting for legal and lease charges taken in the prior-year period, Sonic’s 2012 fourth-quarter net income from continuing operations rose 13.2 percent to a record $28.8 million.
“Our work continued in the fourth quarter to improve our operations, our capital structure and increase shareholder value through a combination of operational execution and share repurchases,” Smith said in a prepared statement.
“Looking into 2013, we believe we can continue to build on the momentum generated last year to offer our customers an exceptional and unique buying experience and build customer loyalty.”
For the full year, Sonic’s net income rose 17 percent to $89.1 million. Full-year revenue rose 11 percent to $8.4 billion.
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