CHARLOTTE, N.C. -

After Sonic Automotive announced record quarterly new and used sales, the company’s third-quarter earnings conference call centered largely around its new standalone used store brand, EchoPark Automotive.

In the company’s initial results release, it said that the EchoPark stores retailed 920 pre-owned units during Q3, which is up 4.4 percent from the 881 units sold in Q2.

Sonic continues to see success with its three EchoPark stores — which are part of a new used-sales strategy with rooftops near Denver.

Although EchoPark’s Q3 sales were up from second-quarter results, investors questioned whether or not expansion was slowing, since sequential growth was stronger in the first and second quarters.

Sonic management reassured the audience on Wednesday’s conference call this was not the case, and that the company plans to grown EchoPark’s store count shortly.

“Oh, yeah. We're right in line if not better, and that's just September; it's just like June, July and August. It's just a stronger period of time in the Denver market for used-car sales, but that's nothing more than seasonality built in,” said Scott Smith, Sonic’s president. “And we are right in line; as a matter of fact we've announced last quarter that we were going after our first market and looking at our second pod.

“But the board has challenged us to go ahead and open up two pods. Our team is prepared for that. And we've picked out both of those markets and are actively purchasing real estate now to get those next-generation stores up and running.”

Jeff Dyke, executive vice president of operations at Sonic, elaborated a little bit more on that “next-generation” concept, explaining that the new stores are significantly cheaper to make operational. According to Dyke, once the company buys property for an EchoPark store, the dealership can be up and running in six months. And Sonic aims to bring that down to four months.

The next-generation stores will also have more inventory, bringing the number up from 125 units to a range of 150-200.

Sonic management said the company’s goal is to have 25 to 30  EchoPark stores operating by the end of 2017.

And EchoPark stores are outperforming the company’s internal projections, Dyke added.

“They're really doing a great job and the customer demand, if you go online and read some of the Yelps and things that our customers are saying about us, they absolutely love it, and our associates love it,” Dyke said.

When asked about return on investment in the current EchoPark stores, Sonic chief financial officer Heath Byrd did not seem worried.

“We're building these stores with about a $7 million to $7.5 million cost structure, including real estate,” said Byrd. “And we should be able to sell, when each neighborhood store is rolling, 125 to 150 cars. That's going to yield a $1.2 million to $1.5 million a year in net income.”

And in fact, the company expects EchoPark to positively impact company metrics, such as used gross profit per unit, which was down about $128 year-over-year this past quarter.

When asked whether the EchoPark stores would serve to help push used-vehicle gross profit per unit up, Dyke said, “It should help.”

“EchoPark is running used, F&I and recon combined at $3,300, something like that … And so, it should help it. The used-car margins are better, so it should help it, especially versus the import and domestic stores,” said Dyke. “But what's really going to be fun is just the extra gross dollars it's going to bring to the table just because we're selling so many cars, but that's going to make a big difference.”

Management also touched on the service business potential of its EchoPark stores during the call, as well as how they plan to cut down on recon costs for the stores’ inventory in the future.

Smith said, “The way we're looking at it is we've built enough capacity to-date to handle our reconditioning. Right now, we're reconning so many cars so fast, in trying to keep up with that that if we go out and start really heavily advertising and marketing for service, it's going to put a damper on the amount of cars that we can get through.”

That said, the company is in partnership with Manheim to ease the burden of making used vehicles front-line ready.

“We’re working with our partners from Manheim to have them begin to take over that load and to begin, based on our buying criteria and our buying tools, buying the cars, reconning the cars, doing the detail of the cars, taking the photos, uploading them, and then delivering and putting them on our shelf, kind of like Coca-Cola would do for Walmart,” Smith explained.

He said that this partnership will keep the dealer group from having to build huge recon facilities for their EchoPark stores, as well as cut doen on the added expense of hiring personnel to man the facilities.

“So we're working very hard to mitigate that expense so that we can move forward and grow profitability with a lower cost basis,” Smith said.