Sonic Automotive Inc., the nation's third-largest dealership group, last week became the second publicly traded auto retailer to announce a quarterly shareholder dividend.
A week earlier, Lithia Motors Inc., of Medford, Ore., said it would pay dividends.
Analysts say the dividends are a sign of confidence for publicly owned dealership groups.
A dividend "is a reflection of the company's stable cash flows," says Rick Nelson, retail analyst for Stephens Inc. in Chicago.
Sonic's first dividend of 10 cents a share, a total of $4.2 million, will be paid Oct. 15 to shareholders of record as of Sept. 15.
The company's share price dropped 9 percent, or $2.37, to $24.58 a share after reporting the dividend and announcing a 10 percent decline in second quarter net income.
Sonic, of Charlotte, N.C., saw earnings fall to $28.5 million, or $0.68 a diluted share, from $31.5 million or $0.71 a diluted share for the year-ago quarter. Second-quarter sales revenue rose 5 percent to $1.9 billion.
The company's net income dropped 25 percent to $40.2 million in the first half. Revenues rose 9 percent to $3.6 billion during the same period.
Sonic says earnings were hurt by a weak used-car market and slim profits on new vehicles. The company says it is reducing costs and improving inventory control.
The nation's five other major public retailers last week posted mixed financial results. Three groups, including No. 1 AutoNation Inc., announced small increases in second-quarter earnings. The others reported small declines or were flat.
|Financial results for the 6 largest public dealership groups in the second quarter of 2003 and percent change from comparable period of 2002|
| ||NET INCOME ||% CHANGE||REVENUES||% CHANGE |
|Asbury||$12.3 million||-3.90%||$1.2 billion||9.00%|
|AutoNation||106.3 million||2.4||5.1 billion||1.6|
|Group 1||20 million||4.7||1.15 billion||11.7|
|Lithia||8.5 million||7.6||667.5 million||14.2|
|Sonic||28.5 million||-10||1.94 billion||6|
|UnitedAuto||23.9 million||0||2.2 billion||18.7|
AutoNation, of Fort Lauderdale, Fla., says second-quarter net income was $106.3 million on $5.1 billion in revenue. That was up from $103.8 million in net income on $5 billion in revenue in the year-ago quarter. In the first half of 2003, AutoNation says it earned $291.3 million on $9.5 billion in revenue. That compared with $195.5 million in net income on $9.8 billion in revenue during the same period of 2002. AutoNation says a favorable IRS tax settlement in the first quarter inflated six-month net earnings. Though it reported only single-digit net earnings and revenues growth in the second quarter, the company says its average gross profit per vehicle on finance and insurance was a record $804. No. 2-ranked UnitedAuto Group Inc., of Detroit, announced second-quarter net income of $23.9 million, the same level as 2002. Second-quarter revenue grew 18.7 percent to $2.2 billion. In the first half of 2003, UnitedAuto reported $37.6 million in net income on $4.2 billion in revenue, compared with $39.6 million net income on $3.4 billion in revenue in the year-ago period. UnitedAuto says it achieved healthy increases in new- and used-vehicle sales, service and parts sales, as well as F&I revenues. But it says accounting changes caused net earnings to be flat. UnitedAuto says it had to subtract $1.9 million in income to reverse $3.1 million in revenue that was "falsely recorded" during the 23-month period preceding March 31. UnitedAuto Group said the $3.1 million overstatement was discovered during a routine internal audit of the company's Arkansas dealerships. UnitedAuto called the overstatement "immaterial to the company's financial statement." Asbury Automotive Inc., of Stamford, Conn., reported a 3.9 percent decline in second-quarter net income, to $12.3 million on a 9 percent increase in revenue to $1.2 billion in revenue. Asbury says high costs cut into earnings. The company says it is working on lowering expenses and has closed unprofitable used-car operations. Net earnings at Group 1 Automotive Inc., of Houston, rose 4.7 percent, to $20 million on an 11.7 percent increase in revenue to $1.15 billion. Growth from acquisitions offset a decline in revenues at stores.
Group 1 has operated for at least one year. The company reported double-digit growth in parts and service and F&I revenues. Lithia Motors Inc. said its second quarter net earnings rose 7.6 percent to $8.5 million on a 14 percent increase in revenue to $667.5 million. Lithia says it had double-digit sales increases at existing stores and increased its new-vehicle gross profit margins.