Sonic Automotive Inc is a retailer with ambition. Late last year, Sonic announced agreements to acquire 69 dealerships totaling about $3 billion in estimated 1999 revenue. Those dealerships will come in addition to the 45 franchises and 17 collision repair centers Sonic already holds across the South and Midwest.
Such ambition helped make Sonic, of Charlotte, N.C., the top-performing publicly held automotive retailer for the two years ended Dec. 31, 1999. The No. 1 ranking came from an analysis of shareholder value by PriceWaterhouseCoopers. A $1,000 investment in Sonic at the beginning of 1998 would have returned $2,100 two years later.
Most other vehicle retailers lost shareholder value over the two-year span. The index showed an average 59.4 percent loss of shareholder value for the two-year period. Results for the category were dragged down by AutoNation Inc., which accounted for 75 percent of the group's total market capitalization. AutoNation's shareholder value declined 39.9 percent in 1999 and 61.7 percent over the two-year period.
Charles Seguin, a partner with the automotive retail practice of PricewaterhouseCoopers LLP in Toronto, said Sonic gained in part from investor enthusiasm following the company's November 1997 initial public offering.
But that enthusiasm didn't last. Sonic's performance ranked just No. 6 for last year. A $1,000 investment in Sonic stock on Jan. 1, 1999, would have been worth $587 just 12 months later.
The retail auto sector is a new trading group. Heightened competition and soured Wall Street expectations have dampened that sector's stock performance over the past year, Seguin said.
The top performer for 1999 was Rush Enterprises Inc., which operates the largest network of Peterbilt heavy-duty truck dealerships in North America. Rush also has John Deere construction equipment dealerships.
Rush, of New Braunself, Texas, showed a 31.8 percent gain in shareholder value last year. Seven of the other companies on the 1999 index posted declines.
'It's a lot harder business to manage than anyone ever thought,' Seguin said. 'The retail business consists of six businesses under one roof: new- and used-car sales, parts, service, body shop and financing.'