Sonic's loss widens despite record Q1 revenue

Sonic Automotive Inc.'s first-quarter revenue rose, driven by double-digit gains in finance and insurance and retail and wholesale used vehicles, but the net loss at the nation's fifth-largest auto retailer widened from a year earlier.

Total revenue rose 4.9 percent to $2.4 billion.

The company reported a net loss of $2.2 million vs. a loss of $541,000 a year earlier. Adjusted net income from continuing operations rose 7.1 percent to $11 million. The adjustments in the latest quarter reflect a gain on the disposal of franchises offset by fixed asset impairments, compensation-related charges, lease exit accruals and certain legal matters, the company said in a Thursday.

"The first quarter met our internal earnings expectations," CFO Heath Byrd said in the statement.

Records: Sonic hit first-quarter record highs in revenue, total gross profit, F&I gross profit and fixed operations gross profit. The dealership group hit all-time record highs in used-vehicle retail sales and F&I gross profit per unit.

Sales: New-vehicle sales fell 3.3 percent to 29,500. Used-vehicle sales rose 11 percent to 33,739.

Same-store sales: New-vehicle sales slipped 1.5 percent to 29,416, vs. a 2 percent gain for industrywide first-quarter U.S. light-vehicle sales.

"We shifted our strategy during the quarter related to the number of used-vehicle inventory we are carrying," Byrd said in the statement. Gross profit per unit on used vehicles dropped 19 percent to $1.1 million. Sonic wholesaled 9,680 vehicles in the quarter, up 17 percent from a year earlier, and lost more on each unit wholesaled: $457 vs. $141 a year earlier. So its gross loss on wholesale vehicles was $4.4 million, widening from a loss of $1.2 million a year earlier. The worsened results in used retail and wholesale vehicles "resulted from us aggressively disposing of units to reduce our overall days' supply of used vehicles," Byrd said.

"Additionally, we believe we found a good compromise between volume and gross for new vehicles and we were able to grow both fixed operations and F&I gross profit compared to the first quarter of 2017," he said.

Sonic, of Charlotte, ranks No. 5 on Automotive News' list of the top 150 dealership groups based in the U.S., with retail sales of 133,728 new vehicles in 2017.