Just three days after dodging bankruptcy by restructuring its debt, Sonic Automotive Inc. today said it ended two quarters of losses by posting a $1.7 million profit.
The nations No. 3 auto dealership group credited the results to efforts to build local dealers market share in a shrinking market. Sonic also continued cutting costs and raised its target for cost reductions during the current year by an additional $10 million, to $135 million.
The $1.7 million first-quarter profit compared with net income of $12.6 million a year earlier and followed combined losses of $711 million in the previous two quarters. Revenue plunged to $1.18 billion, down 25 percent from the same quarter a year ago.
On Tuesday, Sonic avoided bankruptcy when bondholders allowed the Charlotte, N.C.-based dealership group to postpone a $90 million debt payment until 2012. On April 1, Sonic warned of a possible bankruptcy if it wasnt able to restructure debt that would have matured this week.
Sonics profit came as U.S. vehicle sales rates fell to 27-year lows. Overall U.S. sales plunged 37.4 percent during the first four months of the year compared with the same four months of 2008.
Our continued focus on executing the basic blocking and tackling of our playbook produced solid results in the most difficult automotive business environment in at least a generation, Sonic President Scott Smith said in a statement. Our advertising and Internet marketing initiatives resulted in 83 of our dealerships taking share by exceeding their local markets for the quarter. Our used-vehicle business continues to outperform the industry.
Over the past six months, Smith said, Sonic has cut 10 percent of its work force. He added: We now have fewer people making more money.
Sonic said new-vehicle sales plummeted to 16,801 during the quarter, down 30 percent from the first quarter of 2008. Used-vehicle sales remain relatively stable at 15,155, compared with 15,782 sold a year ago.
Sonic ranks No. 3 on the Automotive News list of the top 125 U.S. dealership groups for 2008.