UPDATED: 7/22/14 4:18 pm ET - adds stock close
Sonic Automotive Inc. posted higher revenue and net profit during the second quarter, but expenses increased as the retailer continues to ready its launches of a new customer-experience initiative and standalone used-car stores.
Sonic, the country’s fourth-largest dealership group, said net income more than tripled during the quarter to $27 million, up from $8.9 million in the year-earlier period, but the soaring results reflected extraordinary items that boosted this year’s results and lowered last year’s.
Earnings for 2014’s second quarter were aided by a pretax gain of $5.9 million related to the disposal of franchises. That was partially offset by hail damage and legal settlement charges. A year earlier, results had been slashed by a $29 million pretax charge related to debt restructuring.
Revenue rose 7 percent to $2.35 billion. Sonic shares fell 5 percent today to close at $24.84.
Sonic’s adjusted operating income fell 8 percent during the quarter. Total gross profit rose 7 percent to a record $346.9 million.
“We posted a solid performance in the second quarter, growing the top line and gross profit in every revenue category,” Sonic President Scott Smith said in a statement. “We are also very excited about the kickoff of our One Sonic-One Experience initiative in our Charlotte market during the third quarter of 2014. This initiative, combined with our pre-owned store initiative, which we plan to open in Denver, Colo., during the fourth quarter of 2014, is one of the cornerstones which will enable Sonic to rapidly grow in the future.”
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Sonic said expenses associated with the used-only stores were $3.2 million during the quarter, up from $700,000 a year earlier.
Flat new sales
Sonic’s new-vehicle unit sales were flat in the quarter at 35,405, whereas industrywide sales rose 7 percent. New-vehicle revenue rose 4 percent to $1.3 billion, while gross profit rose 9 percent to $74.2 million.
Used-vehicle retail sales rose 7 percent to 28,514, pushing revenue up 12 percent to $603.9 million. Gross profit on used-vehicle retail sales was flat at $37.5 million.
On a same-store basis, new-vehicle sales fell 1 percent to 34,713, while revenue rose 2 percent to $1.26 billion and gross profit rose 7 percent to $72 million. Used-vehicle retail sales rose 5 percent to 27,617, as revenue rose 10 percent to $582.4 million and gross profit slid 3 percent to $36.7 million.
Revenue on parts, service and collision repair rose 7 percent to $329.1 million, while gross profit rose 6 percent to $159.9 million.
Finance and insurance net revenue rose 11 percent to $76.7 million, as gross profit per unit rose 5 percent to $1,211.
The customer experience initiative begins this month 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 say the effort ultimately will lead to shorter transaction times, better customer satisfaction, lower employee turnover and higher sales.