Sonic Automotive Inc., the nation's third-largest automotive retailer, posted a sharp rise in second-quarter profits on higher sales of new and used vehicles.
Sonic reported net income of $14.8 million, up 68 percent from $8.8 million in the second quarter of last year. Both earnings totals reflect an upward adjustment primarily associated with debt refinancing, the company said.
Second-quarter revenues rose 11.8 percent to $1.7 billion.
Retail sales of new and used vehicles rose 17 percent to 49,478 units.
Sonic Automotive reported double-digit growth in its used-vehicle unit volume and sold one used vehicle for every new unit sold during the second quarter.
It marked the second consecutive quarter that Sonic has reported a 1-to-1 sales ratio for new and used vehicles. The company also increased used-vehicle unit volume 20 percent over last year.
“Our goal is to sell 100 used vehicles per store,” said Sonic President Scott Smith. “We averaged 75 vehicles per store in the second quarter.”
Used vehicles typically carry fatter profit margins than new vehicles. A jump in used-car business also brings older vehicles into service departments -- a key strategy for offsetting declines in warranty business and lower new-vehicle sales. Older vehicles also require more service than newer models.
“The used-vehicle business has tremendous upside potential,” said Jeff Dyke, Sonic's executive vice president.
The used-vehicle strategy is one of several that helped the company achieve income and revenue growth during the quarter and in the first half of the year.
Sonic reported adjusted net income of $20.4 million on revenues of $3.3 billion in the first six months of the year, compared with adjusted net income of $13.5 million on revenues of $2.9 billion in the first half of 2009.
Other high-margin business contributed to the growth.
Sonic's service, parts and body shop revenue for the quarter was up about 5 percent year over year, and gross profit was up more than 3 percent. Nonwarranty retail service is a growing chunk of Sonic's business -- currently about 46 percent of service revenues, said Dyke.
“We've launched an aggressive tire campaign,” he said. “We believe this is a great way to attract nonwarranty customers to our shops.”
