Sonic Automotive reported second-quarter earnings that fell short of Wall Street expectations as the company ramped up spending on its chain of used car dealerships.
The Charlotte-based auto dealer said it plans to roll out several new applications for its One Sonic One Experience sales model and will begin expanding its EchoPark used-car chain into new markets within a year.
In a securities filing Monday, Sonic said net income in the second quarter fell 45 percent to $14.8 million from the same period a year ago as the company’s expenses rose. Revenue increased 3 percent to $2.4 billion.
The company’s adjusted income from continuing operations of $23.4 million, or 46 cents a share, in the quarter that ended June 30, missed the consensus estimate from Bloomberg-surveyed analysts who had expected 47 cents a share. Included in this was $4.1 million in EchoPark-related expenses, the company said.
In the same quarter of 2014, Sonic’s earnings were 44 cents a share, and it had spent $3.2 million on EchoPark operations.
The company said it reached a milestone last quarter of selling 100 pre-owned cars per store per month in stores that had been open at least a year. That helped boost quarterly used car sales to a record high of 30,301 units, up 6.3 percent from the previous year.
New retail sales totaled 34,963, down about 1.2 percent from the same quarter in 2014.
In a call with analysts after the earnings release, Scott Smith, Sonic’s president, said EchoPark, which opened last year in Denver, “continues to exceed” the company’s internal budget. Sonic will open two more Denver locations in the next year, Smith said, and has identified its newest markets, which could include up to 10 locations.
Sonic’s executive vice president of operations, Jeff Dyke, also said Sonic will launch new applications for its One Sonic One Experience sales model over the next year and a half. The platform, launched last year, aims to eliminate the “pain points” of traditional car buying, like price haggling. Salespeople conduct transactions digitally using iPads to determine a car’s true market price.
Of the progress of One Sonic in Charlotte dealerships, Smith said the company is “cautiously optimistic” that it will begin to show profit and share gains by the end of 2015, “allowing us to begin a serious discussion about four One Sonic-One Experience implementation across the company.”