Sonic warns of earnings hit on ‘lower’ BMW, Honda spiffs

Sonic Automotive Inc. on Tuesday warned that second-quarter and full-year earnings will suffer from an unexpected drop in new-vehicle gross profits at its BMW and Honda dealerships.

Dealerships selling those brands “historically have represented approximately 40 percent of our store level profits,” Jeff Dyke, Sonic Automotive’s executive vice president of operations, said in a statement. “Beginning in the second quarter, new-vehicle gross profit per unit at our BMW and Honda dealerships was significantly lower than expected due primarily to lower manufacturer-to-dealer incentives on certain models.”

Honda and BMW didn’t immediately comment.

The Charlotte, N.C., retailer, which ranks No. 5 on Automotive News’ Top 150 dealership groups based in the U.S. by 2017 new-vehicle sales, expects earnings from continuing operations to fall to between 37 cents and 41 cents a share in the second quarter and to $1.65 to $1.75 a share for 2018. In February, Sonic had said it expected its earnings per share from continuing operations to range from $2.21 to $2.45 for all of 2018.

In the statement Tuesday, Dyke said Sonic expects to see continued margin pressure on Honda and BMW sales in the third quarter.

“However, we are optimistic that support from our manufacturer partners and highly anticipated new model releases from BMW in the fourth quarter will drive consumer demand and increased profitability on new units,” Dyke said in the statement.

Dyke told Automotive News last month that the dealership group has 15 BMW stores and 14 Honda locations.

Sonic plans to release second-quarter results July 27.

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