Sonic Automotive Q3 Profit Falls as Costs Offset Used-Vehicle Growth

Sonic Automotive Inc. (NYSE: SAH) reported nearly flat third-quarter 2026 revenue but lower earnings as higher expenses and weaker franchised-dealership results outweighed growth in used-vehicle sales and the Powersports business. The automotive retailer also raised several full-year profitability assumptions, including new- and used-vehicle gross profit per unit, while reducing its fixed-operations growth outlook and projecting higher adjusted selling, general and administrative expenses.

Consolidated revenue was $3.99 billion, compared with $3.97 billion a year earlier. Net income declined 12% to $41.1 million, while diluted earnings per share fell 4% to $1.28 as the diluted share count decreased. Adjusted net income dropped 15% to $41.9 million, and adjusted diluted EPS fell 8% to $1.30.

Adjusted EBITDA was $134.4 million, down 10% year over year. Total gross profit was broadly unchanged at $617.5 million, but reported SG&A expenses increased 3% to $466.8 million. Adjusted SG&A expenses rose to 75.4% of gross profit from 72.8% in the prior-year quarter, contributing to an 8% decline in operating income to $112.4 million.

Vehicle sales trends were mixed. Consolidated retail new-vehicle volume fell 5% to 30,356 units, and new-vehicle revenue declined 6% to $1.78 billion. Used-vehicle volume increased 10% to 48,545 units, lifting used-vehicle revenue by 10% to $1.38 billion. Parts, service and collision-repair revenue grew 2% to $543.3 million, while finance and insurance revenue decreased 1% to $202.2 million.

Franchised dealerships face volume and expense pressure

The Franchised Dealerships segment generated $3.28 billion in revenue, down 3% from a year earlier. Segment income fell 22% to $47.6 million, and adjusted EBITDA decreased 12% to $116 million.

Retail new-vehicle unit sales declined 7% to 28,145, although gross profit per unit increased 2% to $3,048. Retail used-vehicle volume rose 1% to 26,724 units, but used-vehicle gross profit per unit declined 2% to $1,500. F&I gross profit per unit was essentially unchanged at $2,599.

Fixed-operations gross profit increased 2% to $265.4 million, with the gross margin expanding to 51.5% from 51.2%. However, total segment gross profit declined 2% to $529.3 million. Adjusted SG&A expenses reached 75.6% of gross profit, up from 72.8%, as compensation and other operating costs consumed a larger share of gross profit.

Management said elevated new-vehicle prices continue to create affordability challenges and pressure unit volume. The company is managing inventory across internal-combustion, hybrid and battery-electric vehicles to reflect consumer demand. Sonic estimated that battery-electric vehicle sales reduced its year-to-date average new-vehicle gross profit per unit by about $125 because of higher inventory supply, higher prices and consumer preference for hybrids.

EchoPark volume rises as gross profit per unit declines

EchoPark revenue increased 14% to $596 million as retail used-vehicle sales rose 22% to 19,923 units. The segment’s average monthly volume per store increased to 369 units from 303 a year earlier.

The higher volume did not translate into higher quarterly profitability. Total gross profit per used vehicle, including F&I, fell 12% to $2,972. Sonic attributed part of the decline to a greater mix of battery-electric and high-mileage vehicles, which typically produce lower F&I product penetration. EchoPark adjusted EBITDA was $7.9 million, down 4% year over year and 43% sequentially.

Sonic plans to open one EchoPark location in the fourth quarter of 2026 and two to four locations in 2027. The company also expects to spend an additional $5 million to $7 million on EchoPark brand advertising in the fourth quarter to support consumer awareness and expansion.

Powersports benefits from acquisitions and seasonal demand

Powersports revenue rose 35% to $113.7 million, while gross profit increased 26% to $29.3 million. Adjusted EBITDA advanced 4% to $10.5 million. New-unit sales rose 32%, and used-unit sales increased 35%.

The segment includes five Harley-Davidson dealerships and one authorized retail outlet acquired in April 2026. Sonic said it is standardizing operating processes and pursuing inventory, F&I and cross-selling benefits across the expanded network. Management also noted that Powersports demand is generally weaker in the first and fourth quarters.

2026 outlook reflects stronger vehicle margins but higher costs

Sonic now anticipates full-year new-vehicle gross profit of $3,050 to $3,100 per unit, compared with its previous range of $2,850 to $3,000. Its used-vehicle gross profit forecast increased to $1,450 to $1,500 per unit from $1,350 to $1,450.

The company reduced its forecast for same-store fixed-operations gross profit growth to 2% to 3%, from a previous expectation of mid-single-digit percentage growth. It continues to expect F&I gross profit of $2,600 to $2,700 per unit.

Adjusted SG&A expenses are now expected to equal 73% to 74% of gross profit for 2026, compared with the prior outlook for a percentage in the low 70s. The projection includes EchoPark’s planned marketing investment.

EchoPark adjusted EBITDA is expected to be $42 million to $45 million, up from the previous $35 million to $40 million range. The company expects EchoPark retail used-vehicle volume to rise 13.5% to 15% for the year and projects total gross profit per unit of $3,150 to $3,250. Powersports adjusted EBITDA is forecast at $16 million to $17 million, versus the earlier $14 million to $17 million range.

Sonic ended September with $585 million of total liquidity. Its net debt-to-adjusted EBITDA ratio was 2.63 for the 12 months through the third quarter, within management’s target leverage range. The company had $528 million remaining under its share-repurchase authorization as of September 30.

The outlook remains subject to risks including tariffs and import restrictions, vehicle affordability, interest rates, inflation, supply-chain disruptions, labor shortages and changes in new- and used-vehicle demand. Sonic also identified the pace of used-vehicle supply recovery, consumer preferences among hybrid and electric vehicles, and the execution of EchoPark expansion and marketing plans as factors that could affect future results.