Sonic posts 8% drop in Q4 profit, but expects new pricing strategy to prevail
Sonic Automotive Inc. today posted an 8 percent slide in fourth-quarter net income, but the retailer says it continued to gain traction on a new pricing strategy that some of its stores have struggled with.
Sonic, the nation's third-largest dealership group, reported net income for the quarter of $28.1 million. The earnings slide came even as revenues and gross profits in all business categories increased for the quarter. When adjusted for charges related to the impairment of property, equipment and franchise assets, Sonic's fourth-quarter net income was $34.1 million, up 12 percent from the year-earlier period. Total revenues for the quarter rose 6 percent to $2.32 billion.
In a statement, Sonic executives called 2013 a transition year and said they were pleased with the performance given all the changes their stores experienced as the company prepares for a new customer experience initiative launching this summer. They reiterated the work ahead for this year.
"2014 is going to be another challenging year for our team with all of the changes we plan," Jeff Dyke, Sonic's executive vice president of operations, said in a statement. "But, if history is any indication, our team will succeed in executing these initiatives, and I can't wait to see them go to work. It's going to be fun."
Sonic plans to start the rollout of its One Sonic-One Experience initiative on July 1. The initiative aims to simplify the purchase experience by using iPads to handle vehicle sales from beginning to end. Company leaders expect the change to ultimately lead to shorter transaction times, better customer satisfaction, lower employee turnover and higher sales.
The company will also launch stand-alone used-vehicle stores this year. Sonic's first such store is expected to open in Denver during the fourth quarter.
"As we have demonstrated over the last several years, one of our core competencies and competitive advantages is our ability to execute in the pre-owned space," Sonic President Scott Smith said in the statement. "We intend to capitalize on this strength."
For the full year of 2013, Sonic reported net income of $81.6 million, down 8 percent from 2012. When adjusted for charges, net income for the year rose 7 percent.
Sonic rolled out its True Price strategy to all of its dealerships during the first quarter of last year. The program sets vehicle prices within $300 of the lowest acceptable transaction price. Employees at some stores struggled with the change, though executives said implementation improved steadily as the year progressed.
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