Sonic Automotive Inc. is seeing improvements in vehicle sales and parts-and-service gross profit after business fell sharply beginning in March as stay-at-home orders spread.
Same-store new-vehicle volumes for the Charlotte, N.C., retailer fell by a third in March, while used-vehicle sales tumbled by a quarter vs. a year ago. In April, new-vehicle sales declined 40 percent, and used-vehicle sales at Sonic’s franchised stores and its standalone EchoPark stores fell about 20 percent. Parts-and-service gross profit dropped about 40 percent in April.
But executives said results improved weekly last month, and they now expect both sales and service to return to pre-COVID-19 levels in the summer.
The nation’s sixth-largest new-vehicle retailer let 1,200 employees go permanently and furloughed 1,700. That combined number represented about a third of its work force.
Sonic, which has had about 10 employees diagnosed with COVID-19, also halted hiring, trimmed advertising and other expenses and has postponed some capital expenditures in an effort to save $14 million a month.
Some furloughed employees have returned, and Sonic executives say they want to bring back most of them by July.
Sonic opted to return funding received through the federal government’s Paycheck Protection Program, CEO David Smith said. He wouldn’t disclose the dollar figure, saying only that it was “a relatively small amount.” He said the company’s decision came before guidelines were issued in late April that required large companies to certify that they needed the funding and cast doubt that public companies would be able to do so “in good faith.”
Sonic drew $210 million from a revolving credit line as it worked to boost liquidity to more than $418 million, up nearly 50 percent since Dec. 31.
But a hit to its stock price led Sonic to write down the value of its franchised business by $268 million during the first quarter, pushing it to a net loss of $199.3 million.