Sonic Q1 profit falls 9% on weather, used-car start-up costs
Editor's note: An earlier version of this report incorrectly stated last year's first-quarter diluted per-share earnings. It was been corrected.
Bad winter weather and costs associated with its standalone used-car store initiative contributed to a 9 percent drop in first-quarter profits for Sonic Automotive Inc.
Sonic, the country’s fourth-largest dealership group, reported net income for the quarter of $19.4 million. The profit drop occurred even as the retailer’s overall revenues and gross profits rose for the quarter. Revenues rose 3 percent to $2.14 billion.
Same-store gross profits jumped in all business categories except for new-vehicle sales. New-vehicle unit sales rose a fraction of a percentage point overall but slid 4 percent on a same-store basis. By comparison, overall sales of new vehicles in the United States rose 1 percent in the first quarter.
Used-vehicle unit sales rose 4 percent overall and 2 percent on a same-store basis. Sonic touted its used-car results, saying overall unit sales and gross profits were records.
“We have been very busy in the first quarter. I’m happy with the progress we have made in both pre-owned and in our customer experience initiatives,” Sonic President Scott Smith said in a statement. “We are very excited about the opening of our pre-owned stores in Denver expected in the fourth quarter 2014.”
Sonic said its earnings per diluted share, on a continuing-operations basis, were trimmed by 2 cents because of costs associated with the used-car stores and by another 2 cents by bad weather early this year in the Southeast, to 38 cents, vs. 41 cents a year earlier.
Sonic has two big changes on tap for 2014. In addition to the used-car stores slated to open late this year, Sonic will launch its new customer experience initiative this summer.
July 1 rollout
The rollout of what the company calls its One Sonic-One Experience initiative begins July 1 at a Toyota store in Charlotte, N.C. It aims to simplify the purchase experience by using iPads to handle vehicle sales from beginning to end. Company leaders predict the effort will ultimately lead to shorter transaction times, better customer satisfaction, lower employee turnover and higher sales.
“As we move toward our One Sonic-One Experience launch, we expect to gain significant market share as customers benefit from the entire complement of our new shopping experience,” Jeff Dyke, Sonic executive vice president of operations, said in a statement. “Bottom line, when we fully implement One Sonic-One Experience, we will offer the automobile buying community a shopping experience that no other competitor in our industry can offer, or will be able to offer, for several years to come.”
Dyke also said Sonic is starting to see some improvements in its new-car business since it was disrupted by the rollout of its True Price strategy to all dealerships during the first quarter of last year. That program sets vehicle prices within $300 of the lowest acceptable transaction price. Employees at some stores struggled with the change.
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