Sonic Automotive Stuns with Q2 Results Despite Revenue Drop, Dealership Issues: Details – Sonic Automotive (NYSE:SAH)

Sonic Automotive, Inc. SAH reported a 5.5% year-over-year decline in total revenue for the second quarter of 2024 to $3.453 billion, which was below the consensus estimate of $3.583 billion.

The company reported adjusted earnings per share of $1.47 (-20% year-over-year), beating the market consensus of $1.38. Franchise segment operating results included a 3% decline in same-store revenue and a 9% decline in same-store gross profit.

Quarterly gross profit fell 5.2% year over year to $539.1 million, with gross margin coming in at 15.6% (flat year over year). Operating income rose 38% year over year to $107.7 million, with margin rising 100 bps to 3.1%.

The company’s EchoPark segment revenue of $517.3 million declined 14% year-over-year, with gross profit up 91% year-over-year to $51.1 million and used vehicle sales volume of 16,641, down 3% year-over-year. EchoPark segment adjusted EBITDA increased 123% year-over-year to $7.2 million. Excluding store closures, adjusted EBITDA was $9 million (+149% year-over-year).

“Sonic’s access to CDK-provided IT systems has been restored, however, in July, we experienced an operational disruption related to the functionality of certain CDK Customer Lead applications, inventory management applications and related third-party application integrations with CDK. As a result of the business disruption caused by the CDK outage, we estimate that our GAAP pretax income in the second quarter was negatively impacted by approximately $30 million, or $0.64 of diluted earnings per share,” said David Smith, president and CEO of Sonic Automotive.

Dividend: Sonic has approved a quarterly cash dividend of $0.30 per share, payable on October 15, 2024 to all shareholders of record as of September 13, 2024.

“As of June 30, 2024, we had $467 million in cash and floor plan deposits and approximately $885 million in total liquidity before unencumbered real estate,” said Heath Byrd, Sonic Automotive’s CFO.

Perspectives:Noting the continued improvement in the used vehicle market, the company reiterated its EchoPark segment’s positive quarterly adjusted EBITDA forecast for the remainder of 2024, which should help mitigate the continued impact of franchise margin normalization on consolidated earnings potential.

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Reduction: SAH shares were trading 2.31% lower at $54.60 in pre-market trading, the last valuation on Monday.

Photo via Shutterstock