CHARLOTTE, N.C. –
EchoPark Automotive is making a “v-shaped” rebound, its president said, with sales for Sonic Automotive’s line of standalone used-car stores up double-digits in the first half of June and likely returning to pre-pandemic expectations this month.
That was part of sweeping improvements Sonic shared on Tuesday, which included year-over-year hikes in pre-owned sales for the retailer’s franchised dealerships and its EchoPark used-car stores, along with improving conditions elsewhere, including new-car sales and parts and service gross profit.
“We continue to see improving operating conditions since the onset of the COVID-19 pandemic, including steadily increasing automotive retail consumer demand,” Sonic and EchoPark chief executive officer David Smith said in a news release.
“Both new- and used-vehicle unit sales volumes, as well as fixed operations revenues, continue to meet or exceed our forecast at the outset of the pandemic, with used-vehicle sales actually higher than last year in both the franchise and EchoPark locations in June,” Smith said.
“More importantly, we have continued to be disciplined in controlling expenses, allowing our franchised dealerships and EchoPark stores to generate greater than expected profitability in May and June month to date, driving our updated outlook for second quarter earnings,” he said.
At Sonic’s franchised dealerships, same-store used-vehicle sales were up 7% year-over-year in the first half of June. This improves upon an 8% drop in May and a 32% decline in April.
For the EchoPark stores, same-store used sales were up 18% in the first half of June, following a 3% dip in May and a 36% decline in April.
The year-over-year growth was nearly twice as strong when considering all EchoPark locations. June month-to-date used sales were up 34%, compared to the 9% gain in May and the 30% decrease in April.
In slides accompanying the update, used-vehicle sales at Sonic’s franchised dealerships in May ended up being 13% better than the prior forecast. Sonic expects them to return to original forecast conditions in July and stay above the original forecast from August through December.
Those same slides show that EchoPark’s used vehicles ended up 6% stronger in May than the previous forecast. They are expected to be back to the original forecast in June before going above the original forecast from July through December.
“As we anticipated, EchoPark sales have experienced a v-shaped recovery and we expect to be back to our original pre-pandemic forecast unit sales volume this month,” Sonic and EchoPark president Jeff Dyke said in a news release.
“Our guests continue to see tremendous value in the inventory selection, pricing, and purchase experience EchoPark offers. From an inventory perspective, at the end of May we had 57 days’ supply of new vehicles at our franchised dealerships and as consumer demand continues to rebound, manufacturer production challenges may drive inventory shortages over the next few months,” Dyke said. “We continue to maintain less than 30 days’ supply of used inventory at both our franchised dealerships and EchoPark stores, positioning us to meet increasing consumer demand as well as capitalize on expected near-term inventory acquisition opportunities.”
Sharing more results, same-store new-vehicle unit sales at Sonic’s franchised dealerships were down 10% year-over-year in the first half of June, improving on the 20% and 40% drops from May and April, respectively.
Parts and service gross profits were down 10%, better than the 27% decline in May and the 43% downturn in April.
Looking at consolidated Sonic results, total gross profits were off 19% year-over-year in May, compared to a 47% slide in April.
SG&A expenses were up 23% year-over-year in May. In April, they were up 32%.
Pre-tax income climbed 20% in May after falling 241% in April.
Sonic reaffirmed plans for “permanent SG&A expense reductions of approximately $7.0 million per month on a go-forward basis, as compared to pre-COVID-19 levels.”
Prior to his notes on EchoPark’s recovery, Dyke had said in the release, “Business conditions have continued to improve throughout the majority of our markets, with some areas already showing sales volume above pre-COVID-19 levels. This increase in consumer traffic has allowed us to begin to bring back many of our teammates to support these higher levels of business activity.
“At the same time, we remain committed to controlling our expense structure going forward and achieving greater return on investment through rigorous inventory and vendor service management as well as optimizing marketing expenses,” Dyke said. “We continue to see a slower recovery in California, particularly in our fixed operations business, resulting in a reduction of our fourth quarter fixed operations gross profit projections back to our original pre-pandemic forecast.”
The next update is planned for the week of July 27, which is when Sonic plans to report second-quarter financial results.
Sonic notes in its slides: “Due to uncertainty related to the COVID-19 pandemic and the resulting economic impact, actual results may differ materially from management’s forecast.”