Sonic Automotive moves ahead with used-vehicle stores as competitors halt growth plans
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May 25, 2020 12:00 AM

Sonic moves ahead with used-vehicle stores

Melissa Burden
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    Sonic Automotive opened its 10th EchoPark used-vehicle store in April in Tampa, Fla.

    Sonic Automotive Inc. isn't letting off the accelerator on its growth plans for EchoPark, its standalone used-vehicle chain — even in the midst of a global health crisis.

    The nation's sixth-largest new-vehicle retailer opened its 10th EchoPark store in April in Tampa, Fla., and plans to open two more by the end of the year, with plans for another three or four in 2021.

    That sets Sonic apart from three other public retailers that have pulled back, at least temporarily, from growing the number of their used-vehicle stores during the coronavirus pandemic. Penske Automotive Group Inc. and CarMax Inc. both have halted new store projects, while AutoNation Inc. has pushed back a decision on whether it will resume expanding its AutoNation USA used-only business.

    Dyke: Store to open in summer

    Sonic President Jeff Dyke told Automotive News in late April that the retailer would open two more EchoPark stores yet this year but that the planned 2020 opening for an EchoPark location in Atlanta is now pushed to first quarter of 2021.

    "It's a much bigger project," Dyke said. "We've got two other locations that are going into facilities that we already own."

    Dyke didn't identify those locations but this month told CBT Automotive Network that one of the EchoPark store openings would happen this summer in Nashville.

    Sonic executives aim to expand EchoPark to 25 or more locations through 2024. Other EchoPark target markets include Miami/Fort Lauderdale and Orlando, Fla.; Los Angeles; Philadelphia; Phoenix; and Washington, D.C.

    Sonic executives have said the retailer can open an EchoPark location for much less than a new franchised store and that the financial effects of the coronavirus may provide new options.

    "There's going to be new opportunities, great opportunities to grow EchoPark, where we'll be able to grow it at a much less expensive way, whether it's lower construction costs or opportunities for different real estate locations that weren't out there before," CEO David Smith said in an April 30 phone interview. "So we're excited about that."

    Expansion plans amid COVID-19

    Public auto retailers are taking varied approaches to their networks of standalone used-vehicle stores during the pandemic.

    AutoNation: Pushed back decision on whether to open more AutoNation USA stores

    CarMax: Paused store expansions and remodels; had planned to open 13 stores during its fiscal year ending Feb. 28, 2021 

    Penske Automotive Group: Halted construction on 4 supercenters in the U.S. and U.K., moving completion dates to 2021 

    Sonic Automotive: Opened an EchoPark location in April in Tampa, Fla.; plans to open 2 more stores this year

    Holding out hope

    Meanwhile, Penske — which has six used-only CarSense supercenters in the U.S. and 10 CarShop locations in the United Kingdom — said May 6 it had halted construction on four supercenter sites and moved likely completion dates to 2021.

    CEO Roger Penske said the retailer has experienced permitting delays as government offices have been closed and that construction isn't allowed in many areas. Of the four interrupted projects, two were slated for U.S. sites in New Jersey and Phoenix. At least one of the U.S. projects was targeted for completion by the end of 2020.

    "I don't want to promise it, but my goal would be to get one open and we'd be focusing on the other ones in '21," Penske said.

    On hold

    CarMax, the nation's largest used-vehicle retailer, also halted store openings and remodels amid the pandemic.

    CarMax had planned to open 13 stores in its current fiscal year, which ends Feb. 28, 2021, and a similar number of locations in its fiscal 2022.

    Jackson: "It's a big decision"

    AutoNation CEO Mike Jackson told analysts in a May 11 earnings call that AutoNation, the country's largest new-vehicle retailer, had put off capital decisions, including whether it will build more AutoNation USA used-only stores.

    AutoNation executives indicated in February that such an expansion was a possibility after the five-store AutoNation USA business turned a profit for three consecutive quarters. At one point, in 2016, Jackson said the retailer was considering an additional 20 AutoNation USA stores, but expansion was put on hold in 2018.

    Jackson said first-quarter results for AutoNation USA were "very respectable" but were affected by the pandemic.

    "The performance of the stores has been fine. I have no issues there," Jackson told analysts. "But it's a big decision to build more, and we're not prepared to make that at the moment."

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