Performance, profits and growth up, but stock price performance down - a phenomenon not uncommon in today's all too often skittish market.
That's the way No. 5 Sonic Automotive of Charlotte, NC, ended 1999. The company's 110 dealerships (166 franchises as of the end of 1999) generated revenues of $3.35 billion (up 109% from 1998 income of $1.6 billion), but during the year, Sonic's stock price dropped from a high of $17.25 to a low of $7.60.
Nonetheless, it was an encouraging year, says Sonic president and COO Scott Smith, who points to the company's overall growth and surge of acquisitions in 1999, including the merger with San Francisco-based FirstAmerica Automotive's 29 dealerships, which constitutes the largest acquisition in auto retailing history. He also notes that Sonic's history is one of meeting or exceeding its projected numbers.
"Sonic's performance as a company was exceptional in 1999," reports Mr. Smith, "and even though the performance of the stock might not be up to some people's expectations, we still had a better return than the other publicly owned dealership companies. I think we've begun to look to the stock market for 50% returns in a few months, instead of years, because of the surprising performance of some of the new dot coms. Long-term, we're doing pretty well."
One indicator of the company's strong performance, says Mr. Smith, is that the stores Sonic has owned and operated for a year or more achieved a 17% rate of growth in sales, compared with an industry growth rate of 10%.
Sonic has continued its ambitious growth strategy, acquiring 73 new dealerships whose combined revenues totaled $2.9 billion in 1999. As of March 2000, Sonic Automotive consists of 117 dealerships. This figure includes six dealerships added in March 2000, at which time Sonic acquired the Riverside Dealership Group in Tulsa, OK, and the Blount Strange Automotive Group in Montgomery, AL. The new acquisitions, coupled with solid sales performance across the company, catapulted Sonic from its 1998 No. 37 ranking to No. 5 in 1999.
Sonic Automotive now employs more than 10,000 people.
Following the company's "hub and spokes" acquisition strategy, Sonic has penetrated new markets on the West Coast, especially in the San Francisco Bay area, where 13 dealerships were acquired in 1999. Other cities where Sonic has a strong presence are Houston (five dealerships), home base Charlotte (nine dealerships), and the western coast of Florida, from Tampa south to Naples.
The company is planning to build a new Honda facility in Las Vegas, which, according to Mr. Smith, should become one of the top volume Honda stores in the country within two or three years. Sonic's brand diversity has also proven to be strategically sound, with slow sales in Chrysler brand stores being offset by strong sales in BMW and Ford stores.
Addressing one of the auto retailing industry's liveliest trends, Mr. Smith reports positive results in the area of e-commerce.
"About 8% to 10% of vehicle sales originate on the Internet," he estimates. "We've set up Internet departments in all of our dealerships, with dedicated personnel who have had rigorous training in Internet selling. All of our dealerships are connected to a central web site, so our entire company-wide new- and used-vehicle inventory is listed. Plus, you can get to each dealership through the central web site (www.sonicautomotive.com)."