Dyke said Sonic has the ability to adjust the EchoPark store counts in either direction depending on where the used-vehicle market goes. The auto retailer said it is seeing positive signs.
“The lights are definitely out in the stores that we closed but [that] doesn’t mean they can’t be turned right back on and that would be the intention if the market improves like we think it’s going to do,” Dyke said. “It’s just not going to happen in this calendar year. We’ve got a long way to go to get back down to the $21,000, $22,000 price level, if we do. But certainly rapidly improving prices and rapidly improving availability is occurring right now.”
Sonic said the move led to a $13.2 million quarterly loss for EchoPark, which also saw revenue fall 9.1 percent to $600.6 million in the second quarter.
The auto retailer recorded an impairment charge of $75.2 million for the quarter. Sonic said it expects ongoing expenses tied to the closed EchoPark stores will range from $2.5 million to $3 million a quarter.
“The pause at EchoPark, in our view, provides the company time to evaluate growth during the volatile used-vehicle pricing environment,” Michael Ward, an analyst for Benchmark Co., wrote in a research note last week.
To be sure, Sonic is not the only publicly traded auto retailer grappling with a difficult used-vehicle market.
Penske Automotive Group chairman Roger Penske said on a July 26 second-quarter earnings call that the company closed a standalone CarShop store in Arizona because of a low supply of used vehicles in the U.S.
The closure of the used-vehicle Scottsdale, Ariz., store, which opened in 2021, was in the first quarter. Penske said the company continues to focus on vehicle sourcing and remains committed to the CarShop brand.
“The continued availability of late-model, lower-mileage vehicles remains very challenging,” Penske said.
At the end of the second quarter, Penske Automotive had seven CarShop locations in the U.S. and 13 in the U.K. The auto retailer said CarShop revenues rose 1.5 percent to $475 million in the second quarter.