Sonic Automotive’s standalone used-car store program known as EchoPark Automotive is moving full steam ahead and doesn’t appear to be slowing anytime soon.
The hub-and-spoke model that began in Colorado continues to grow, with future stops in the American South.
EchoPark now has five locations open, two of which became fully operational in the third quarter. Those five stores are all in the Denver area.
Sonic chief executive officer Scott Smith said in a quarterly conference call Tuesday that the growth of the two new outlets was “consistent with expectations” and that the other three stores were cash-flow positive.
Sonic plans to open another store in the Denver market by the end of the first quarter and also begin construction in Texas.
According to presentation slides on Sonic’s website, EchoPark revenue for the third quarter was at $40.4 million, up 83.2 percent year-over-year.
Gross profit climbed 44.8 percent to $4.2 million, while operating loss was $3.3 million, which was still 3.3 percent stronger than year-ago figures. Diluted earnings per share were down 25 percent at negative $0.05.
EchoPark had 1,458 unit sales, up 58.5 percent year-over-year.
Again, keep in mind that two stores became operational in Q3.
“The volume’s great,” Jeff Dyke, executive vice president of operations, said of EchoPark during the call. “And we opened two new stores in the quarter. They’re ramping up quicker than the (other) stores. As a matter of fact, they’re already at the volume that the two original neighborhood stores were running maybe six, seven months in.”
That kind of progress plus the fact that the original stores are cash-flow positive provides some momentum for EchoPark.
“That gives us a lot of energy going into Texas. That will be Dallas, Waco, Austin and San Antonio,” Dyke said. “We should break ground in the first quarter in the Dallas market, maybe even San Antonio. We’re working on that this week … and the Carolinas are going to come right behind that.”
Sonic also bought AutoMatch, which is a group of four used-car stores in Georgia and Florida, and Sonic plans to start converting those into EchoPark outlets in 2017.
“We’re ramping EchoPark up as quickly as we can,” Dyke said. “The results early on have been great. And I think it gets validated by some of the other players that are entering the market.”
During the call, the Sonic executives were asked about EchoPark’s gross profit per unit, which was down 31.2 percent at $1,011.
Dyke said that was actually a function of the pricing tool, which intentionally downwardly adjusted prices to spur volume and gross. And interestingly enough, the pricing tool may lead to some automated capabilities at EchoPark.
“We are a lot further ahead on our pre-owned pricing tool than we are on our new-car pricing tool,” Dyke said.
“And we are, I would say, weeks, maybe a month out from being able to pretty much auto-price 75-80 percent of our total inventory across EchoPark without having to have a human element involved, which is fantastic for us,” he added. “It leads to auto appraisals and all kinds of different things for us as we move forward managing this inventory.”