Sonic Automotive's 2024 Q4: Contradictions in EchoPark Performance, EV Impacts, and Powersports Outlook

These are the key contradictions discussed in Sonic Automotive's latest 2024Q4 earnings call, specifically including: EchoPark's Performance Expectations and Inventory Management, Impact of EVs on New GPU Levels, EchoPark Sales Performance and Inventory Management, and Expectations for Powersports Segment:



Record Financial Performance:
- Sonic Automotive reported all-time record quarterly franchise revenues of $3.4 billion, up 12% year-over-year.
- Consolidated revenues grew 9% year-over-year, and consolidated gross profit increased by 6%.
- The growth was driven by a 13% increase in new retail volume, a 5% increase in used retail volume, and a 10% increase in fixed operations revenues.

New Vehicle Market Dynamics:
- The new vehicle day supply decreased to 46 days in Q4, down from 57 days at the end of Q3.
- Same-store new vehicle GPU was $3,241, up from the previous quarter, aligning with guidance to exit the year in the low $3,000 range.
- The increase in new vehicle sales volume was primarily due to luxury brand mix, while the decrease in day supply was attributed to manufacturers managing their inventory better.

EchoPark Segment Challenges:
- EchoPark reported adjusted EBITDA of $4.2 million in Q4, below guidance due to a $200 reduction in used GPU from Q3.
- The decline was attributed to building inventory too quickly exiting Q3, leading to aging inventory and depreciation risks amidst a seasonal slowdown in used demand.
- However, improvements were observed in Q4 with a 14% increase in gross profit despite lower-than-expected front-end used GPU, indicating a recovery.

Powersports Segment Strategy:
- The Powersports segment generated $30.6 million in revenues and $7.5 million in gross profit, with a segment adjusted EBITDA loss of $1 million in Q4.
- The company is focused on operational synergies and disciplined expansion, with an optimistic outlook for future growth opportunities.
- The cautious approach to expansion in this segment is driven by the need to identify operational synergies and refine operating playbooks before scaling up.