Sonic Automotive had record first-quarter used-car sales and March, in particular, was the retailer’s strongest month ever for pre-owned volumes.
The company’s standalone EchoPark pre-owned stores had 1,673 sales during the quarter (up 77.8 percent year-over-year) and could be poised to expand by as many as 20 locations next year.
“If you look at the first quarter, and you look holistically, it’s the first time in a quarter that Sonic Automotive has sold more pre-owned cars than new cars,” executive vice president Jeff Dyke said in an earnings call with the investment community on Wednesday.
“And we expect that to continue to grow,” he said. “The more stores we open up, you’re going to see our used-car business continue to take a commanding lead in the overall volume and mix of this company. And long-term, profitability-wise, it’s going to take the lion’s share of that, too.”
There are currently five EchoPark locations in Colorado, with the next stops being Texas and the Southeast. Last year, Sonic purchased AutoMatch — a group of four used-car stores in Georgia and Florida – and is converting those outlets into EchoPark locations.
“Our stores, on a same-store basis, year-over-year, cash flow was just about break-even for the quarter. Our original stores are making money,” Dyke said. “That’s why we’re pushing forward so hard with EchoPark — (we are) very, very excited about that. Our throughput is great. Our volume growth is excellent.”
He added: “We could not be more excited about EchoPark and the opportunity that we have there. It is just going gangbusters in Denver and we’ve already broken ground in San Antonio (and) Dallas, and the Carolinas will be just behind that.
“We’ll probably get the AutoMatch stores all converted this year, and three or four stores open by the end of the fourth quarter,” he said. “And then we could have the opportunity to open 15 to 20 stores next year.”
Opening new locations for Echo Park
Dyke was asked about weighing the decision to build EchoPark stores (which it is doing in Texas and Carolinas) versus buying existing stores and converting them (which it is doing with the acquired AutoMatch stores in Florida and Georgia).
He said the company is looking at both: greenfields and acquiring stores to convert.
“It’s just a financial decision. It’s a math equation,” he said. “That’s it.”
The criteria for any store, Dyke said, is to have the ability to hold 400 units of sellable inventory.
“And as we meet those standards, we can pop ’em out like popcorn,” he said. “It’s great because our break-even is at a level where we don’t have to sell that many cars and as we continue to grow the brand in these markets like we’re doing in Denver, we start to see nice profitability out of the stores, and then the question is just, how fast can you grow them?
“We’re 100 percent confident in our ability to make money out of them. We’re 100 percent confident in our ability to sell a lot of cars. The big trick is getting your footprint where you want it at the price you want, and then getting it approved by the local governments, which aren’t sometimes as keen as you might believe on having a used-car facility opened up.”
However, Sonic’s experience is that once it has presented to localities, they have achieved a “100-percent success rate” at getting greenlit.
Among other technology updates discussed, Sonic said it will introduce an appraisal app “in coming months.”
Perhaps most significant, Sonic customers will be able handle the entire transaction online, Dyke said.
“They’ll be able to buy a car online and we’ll deliver, white-glove, the car to their place of business, their home, wherever they would like,” Dyke said.
He added: “I know it’s not a large part of the customer base today but we project that over time, that’s going to grow and that opportunity will be there for our consumers to use at their convenience.”