Sonic Automotive to ramp up expansion efforts this year

Charlotte-based Sonic Automotive is eyeing expansion this year with plans to acquire more dealerships, open more standalone used-car stores and spend roughly $200 million on real estate and buildings.

Company President Scott Smith told the Observer on Monday that Sonic is looking to buy dealerships from smaller auto dealers ready to exit their business. There is no timetable for when Sonic will start making deals or how many stores it plans to buy, he said.

“To acquire a family’s business that they’ve committed their entire life’s work to often takes years of talking to the family and getting to know them,” Smith said. “It takes a lot of time.”

Sonic Automotive is a Fortune 500 company founded by Smith’s father, Bruton, the motorsports magnate who remains Sonic’s CEO. The company has more than 100 dealerships in 14 states and employs about 10,000 people, including 500 in Charlotte and Fort Mill, S.C. Most of its dealerships can be found throughout the Southeast and Southwest.

While the company is mulling migrating up north, Smith said executives want to be cautious about the conditions for each new market they inspect. “If the right situation came about (in the north), then yes,” he said. “But it snows up there. That usually hampers the automobile business.”

With cities like Raleigh-Durham, Greensboro and Winston-Salem, North Carolina is an ample market for the company’s growing footprint, he said, and might be the center of future expansion efforts.

Sonic kept away from acquisitions during the downturn to pay down its debts, shore up its balance sheet and build capital that it’s now ready to deploy, Smith said.

The company made $81.6 million in profits in 2013 on revenues of $8.8 billion, down from $89.1 million in profits on revenues of $8.3 billion a year earlier. Sonic will release its fourth-quarter and full-year earnings Feb. 24.

The company’s capital expenditures budget is about $200 million, and much of it is already earmarked to build new dealerships, Smith said.

“That’s taking existing markets, buying new real estate, building new buildings,” Smith said. “If you’re not growing, you’re dying.”

But Smith stressed that the company’s top priority is growing its retail store brand.

Last fall, Sonic opened a chain of used-car retail stores, dubbed “EchoPark,” in the Denver, Colo., area, that operate independently of its dealerships and employ 150 people across three shops. The stores allow customers to peruse its inventory on mobile devices, test-drive vehicles and receive car appraisals.

The main store, Smith said, is on schedule to sell 250 cars this month. Plans call for two additional neighborhood stores with 80 employees to open in Colorado this year, said Smith, adding that he hopes to bring the stores to Charlotte.

This story was originally published January 26, 2015 at 5:43 PM with the headline "Sonic Automotive to ramp up expansion efforts this year."