Sonic Automotive (SAH) recently updated investors with information on the return of customers after the COVID-19 shutdown. The company previously announced that it would be working to reduce costs during the pandemic, to address cash flow needs.
On the cost reduction front, management reported SAH has now cut $7 million in expenses per month, and on a go forward basis. This is compared to spending levels prior to the onset of the COVID-19 pandemic.
David Smith, SAH’s CEO, said the company is seeing improving demand, “We continue to see improving operating conditions since the onset of the COVID-19 pandemic, including steadily increasing automotive retail consumer demand.”
Sonic said it expects to report GAAP earnings per diluted share from continuing operations for the second quarter of 2020 in the range of $0.23 – $0.33. Notably, EchoPark, the company’s new flagship dealership, saw a 34% increase in June, at the time of the report.
Smith noted, “Both new and used vehicle unit sales volumes, as well as fixed operations revenues, continue to meet or exceed our forecast at the outset of the pandemic, with used vehicle sales actually higher than last year in both the franchise and EchoPark locations in June.”
Jeff Dyke, Sonic’s president, said some areas of the country already have sales volume above what it was prior to the beginning of the COVID-19 issues. Dyke said, “As we anticipated, EchoPark sales have experienced a v-shaped recovery and we expect to be back to our original pre-pandemic forecast unit sales volume this month.”
Dyke noted California as one weak spot. Commenting on operations there, he stated, “We continue to see a slower recovery in California, particularly in our fixed operations business, resulting in a reduction of our fourth quarter fixed operations gross profit projections back to our original pre-pandemic forecast.”
California saw the opening of an EchoPark location in Long Beach, late in 2019. EchoPark provides an open air concept, with a focus on the guest experience, in each of its showrooms.
Sonic Automotive stock has made a full recovery from pre-pandemic levels, and has traded back to over $33, even higher than the $33.58 high it reached earlier this year in February. The company plans on providing another update on its 2020 outlook at the end of July.
Steven Adams’s personal position in Sonic Automotive: none.
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