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Sonic's EchoPark Expansion on Track With 2nd Houston Store

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Sonic Automotive (SAH - Free Report) recently announced the opening of its second EchoPark-branded auto dealership in Houston, in a bid to expand the distribution network. Notably, this will be EchoPark’s 11th retail hub location on a nationwide basis.

The used-car segment EchoPark is the major growth engine of Sonic. The company’s focus on expanding the network of stores is set to bolster prospects. Sonic plans to add 25 EchoPark locations per year from 2021 to 2025. Importantly, it remains committed to sell more than half a million vehicles annually by 2025 via a 140-plus point nationwide distribution network. It should be noted that the firm targets $14 billion in annual EchoPark revenues by 2025.

Strong organic growth fueled by EchoPark expansion is likely to significantly boost Sonic’s growth profile. EchoPark investments are anticipated to drive significant unit share gains, going forward. The segment generated revenues of $1.2 billion and segmental income of $9.1 million, up 66% and 117%, respectively, from 2019. Despite coronavirus woes, the EchoPark segment recorded higher year-over-year sales in the last reported quarter. The trend is expected to continue.

The firm’s digital ramp up amid the pandemic is also aiding revenues. In response to coronavirus-led lockdown, the firm began to offer a no-contact purchase experience, allowing 90% of a vehicle transaction to be completed on its website or by phone and delivered to the guest with a safe, no-contact home delivery. Strategic partnership with Cox Automotive and Darwin Automotive to develop a proprietary e-commerce platform and user interface bodes well for Sonic Automotive. This digital retailing partnership is expected to further speed up the firm’s EchoPark expansion plans. 

Sonic presently sports a Zacks Rank #1 (Strong Buy). Other top-ranked auto retailers include Lithia Motors (LAD - Free Report) , AutoNation (AN - Free Report) and Penske Automotive (PAG - Free Report) , each flaunting a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

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