Sonic Automotive Inc. has reduced its employee headcount by a third through terminations and furloughs amid the coronavirus pandemic and cut advertising and other expenses in an effort to save about $14 million a month, the company disclosed Wednesday.
The details are among the first cost-savings initiatives the nation’s sixth-largest new-vehicle retailer has shared publicly during the crisis that has led to stay-at-home orders across the U.S. Sonic said all of its stores remain open for service and are offering “various levels” of vehicle sales depending on state and local orders.
Sonic did not provide specifics on how many employees were terminated vs. furloughed. At the end of 2019, Sonic had about 9,300 employees.
Sonic wrote down the value of its franchised dealership business by $268 million in the first quarter, citing a decrease in its stock market value and expected near-term business reduction. The write-down led to a first-quarter net loss of $199.3 million, compared with net income of $42.2 million in the first three months of 2019.
Adjusted earnings from continuing operations rose 4.9 percent to $17.6 million while revenue slipped 3.4 percent to $2.3 billion.
Shares of Sonic shot up 27 percent to $23.79 in early trading Wednesday.
Sonic, which indicated sales and service disruption from the coronavirus may have bottomed out this month, said through the first two months of the year, same-store revenue was up 17 percent, with new-vehicle unit sales growing 11 percent, used-vehicle unit sales up 27 percent and fixed operations revenue up 8 percent.
Sonic also said it drew $210 million from revolving credit before the end of the quarter, boosting liquidity to more than $418 million. The company also said it is postponing some capital expenditures.
“While there continues to be near-term disruption from the COVID-19 pandemic, our liquidity is strong and our long-term outlook and prospects for Sonic and EchoPark have not changed,” Sonic CFO Heath Byrd said in a statement Wednesday. “We believe that our current liquidity position, coupled with the actions taken to improve efficiencies during this pandemic, position us well for the recovery and will make us a stronger company into the future.”
The company had been quiet about the financial impacts of COVID-19 on its business. Sonic, in a regulatory filing earlier this month, said because of the pandemic, its board of directors canceled awards of performance-based restricted stock units to more than 80 employees, including four named executive officers.
Sonic’s EchoPark standalone used-vehicle stores posted record first-quarter revenue of $331.7 million, up 33 percent. EchoPark unit sales also posted a first-quarter record of 13,986, up 27 percent. The company said prior to the pandemic, it was on pace to sell 16,000 vehicles through EchoPark in the quarter.
EchoPark this month opened its 10th store, in Tampa, and Sonic plans to open two more EchoPark stores by the end of the year.
Records: First-quarter EchoPark revenue, first-quarter EchoPark retail sales and all-time finance and insurance gross profit per retail unit of $1,885.
Sales: New-vehicle unit sales fell 14 percent to 21,724. Used-vehicle unit sales rose 4.1 percent to 40,024.
Same-store sales: New-vehicle unit sales on a same-store basis dropped 6.1 percent to 21,724. That compares with a drop of 12 percent in new light-vehicle sales across the U.S. during the first quarter, according to the Automotive News Data Center. Used-vehicle unit sales on a same-store basis jumped 6.6 percent to 39,105.
Sonic, of Charlotte, N.C., ranks No. 6 on Automotive News‘ list of the top 150 dealership groups based in the U.S., retailing 114,131 new vehicles in 2019. It retailed 162,149 used vehicles for the same period, ranking it No. 6 on Automotive News‘ list of the top 100 dealership groups in used-vehicle sales.