Sonic posts lower average new-car gross profits in 3rd quarter due to low supplies of BMWs

Article by Anita Panait, on October 25, 2012

Sonic Automotive Inc. attributed its lower average new-vehicle gross profits in the third quarter of 2012 to lower supplies of BMW vehicles. Sonic, however, said that inventory levels are returning to normal. Jeff Dyke, Sonic executive vice president of operations for the third-largest retailer in the Unites States, said that its BMW dealerships in the South were short of vehicles since early 2012 as a result of the German carmaker’s regional allocation system.

He noted that supplies were almost non-existent by the end of July. Sonic's BMW supplies were 34 days in total at that time, but were in the 20s at the Southern stores. Dyke disclosed that there were months that he had no BMW 3 series on his inventory. This came as Sonic Sonic posted an 11-percent drop in net income for the third quarter of 2012. Sonic's adjusted income from continuing operations hiked 15% on record new-vehicle volume of 35,062 units.

With 15 stores, BMW accounts for 17% of Sonic's volume but up to 30% of its new-car gross profit, according to Dyke. He told Automotive News that if one’s business is “dropping off that much,” it is hard to make up with any brand. For the third quarter of 2012, Sonic posted average new-car gross profit of $1,987 per vehicle across all brands, which is $442 less than the figure a year ago.

Sonic's typical gross profit on BMWs is $3,100 a car. Dyke noted while BMW vehicle were limited in supply, Sonic’s Honda sales grew. He remarked that that worsened the drop in average gross profit, since the typical gross profit on Honda vehicles declined $300 to $400 due to stiffer competition fueled by incentives.

Dyke, however, said that the situation for Sonic has gotten better as they are now getting more profit from Honda vehicles and their BMW inventory is now back to over 50 days overall and in the low-to-mid 40s for its stores in the South.

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