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Repair-related revenues up in 2014 for mega-dealership chain Sonic Automotive

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Business Practices | Market Trends

Though it’s not its core business, collision repair and other automotive services grew as a revenue stream for Fortune 500 auto dealership chain Sonic Automotive in 2014, the company reported Tuesday.

Sonic Automotive, which has more than 100 dealerships across the country and handles 25 brands, did $322.9 million in collision repair, parts and service business in the fourth quarter of 2014, up 1.9 percent from the last three months of 2013.

Those revenues grew 5.4 percent for the year to $1.297 billion. For comparison, U.S. inflation was 0.8 percent last year.

That’s good news for those of you working in the shops, which make up about 14 percent of Sonic’s revenue, as well as an encouraging sign for collision repair in general.

However, an analyst also noted on the company’s earnings call Tuesday that revenues from warranties, rather than from customer payments, mostly drove Sonic’s single-dealership parts and service income in the fourth quarter compared to other chains. The same could be seen companywide.

“The warranty is going crazy,” President Scott Smith agreed, agreeing that it caught the company by surprise in the fourth quarter.

Smith said some of the disparity’s “pain” would be alleviated by new service initiatives that would bring in more customer-paying business.

“We’re expanding our service facilities … and we’re working on our loaner car program,” he said.

Sonic’s expansion plans and overall 2014 performance should be welcome news for customers and job-hunters. The percentage of dealerships with body shops has decreased over the past decade, as Crain’s Business Detroit reported in summer 2014.

More RDN coverage:

Consumer Reports: Customers happy with shops, like indies more than dealerships

Sonic’s gross profit margin was up 0.2 percentage points for the quarter to 48.4 percent but down 0.4 percentage points for the year at 48.1 percent.

Remember that’s gross profit margin, not operating — gross only deals with revenues minus goods, not any other expense — such as overhead and paying your staff, which are factored into operating margins. (True net margins also factor in expenses like interest and taxes.)

No operating profit margin was not readily available for that portion of Sonic’s business. But for some rough perspective, Sonic’s overall operating margin was 2.5 percent in 2014, while its gross margin was 14.9 percent.

Bankrate has estimated profit margins were more like 10 percent for body shops (unclear if that’s operating or net); and an estimate in a 2007 Connecticut court hearing put net margins in that state at 5 percent.

More information:

“Sonic Automotive, Inc. Reports Record Results and Launch of EchoPark® Automotive”

Sonic Automotive, Feb. 24, 2015