Sonic Automotive Inc. swung to a first-quarter loss due to costs related to refinancing its debt, weak retail sales — and storm damage.
“It’s amazing,” Jeff Dyke, Sonic’s executive vice president of operations, said in a conference call. “We’re getting ready to put up hail nets in the hail prone areas. We’ve just had enough of it. We’ve been getting killed on it.”
In the first quarter, Sonic took a $2.4 million hit from storm damage at some of its dealerships in the South. A year earlier, it took a $6 million hit.
“Our Birmingham stores in Alabama all got hit a few weeks later and then also last week Dallas got hit,” Dyke said. He said more than 1,300 cars experienced damage from hail.
“It’s disruptive for those stores and we’re busily fixing what we can fix and doing what we can to mitigate its effects in the future,” Dyke said.
The damage from last year’s hail storms went beyond Sonic’s stores. Large hail pelted more than 110,000 vehicles around Dallas and San Antonio, causing about $560 million in damage in the first quarter of 2016, the Insurance Council of Texas said.
Besides erecting hail nets at Sonic’s existing franchised dealerships, the nets will also go in at the used-only EchoPark stores Sonic will build in Texas, Dyke said. Hail nets stand above inventory and are made of a material designed to deflect the hail.
They are costly but critical to stave off future losses, said Dyke.
“It’ll cost a few hundred thousand dollars per store, so it’s not the end of the world, but it’s an expense we had not expected,” Dyke said. “But we’ll do our best to get it taken care of now rather than later.”