Q3 2020 Sonic Automotive Inc Earnings Call
Good morning, and welcome to the Sonic automotive third quarter Twentytwenty Earnings Conference call. This conference call is being recorded today Thursday October 29th Twentytwenty presentation materials, which management will be reviewing on the conference call can be.
Accessed at the company's website at <unk>.
Our dot Sonic automotive dot com.
At this time I would like to refer to the Safe Harbor statement under the private Securities Litigation Reform Act of 1995.
During this conference call management May discuss financial projections information or.
Expectations about the company's products or market or otherwise make statements about the future.
Such statements are forward looking and subject to a number of risks and uncertainties that could cause actual results to differ materially from the statements made.
These risks and uncertainties are detailed in the Companys filings with the Securities and Exchange Commission in.
In addition management may discuss certain non G.H.P. financial measures as defined by the Securities and Exchange Commission. Please.
Please refer to the non G.H.P. reconciliation tables in the company's current report on form 8-K filed with the Securities and Exchange Commission earlier today I would now like to introduce Mr., Jeff Dyke President of Sonic automotive.
Mr. Guy you May begin your conference.
Thank you and good morning, everyone and welcome to Sonic Automotive's third quarter 2020 earnings call I'm, Jeff Dodge The company's President joining me on the call today are CFO Mr. Heath Byrd, our executive Vice President of operations Mr., Jim King, our director of financial reporting and Investor Relations Mr. Danny Wilan.
This morning, we reported the highest quarterly earnings in our company's history adjusted EPS. The dollar 29, 95% from the third quarter of last year.
These record results were driven by increasing consumer demand for new and used vehicles as well as improving rate of recovery in our parts and service business continued growth in our ethanol per unit.
Fundamental change in our expense structure.
Our core franchise dealership segment performed very well during the quarter, reflecting steadily increasing consumer demand and margin improvement across all business lines.
Additionally, the previously announced how many I guess your neighbor doctrines continued to drive increasing operating efficiency and unprecedented bottom line profitability at the store level.
Turning to Echopark revenues for the quarter were 385 million or 15% of our total revenues an increase of 23% on a year over year basis Echopark achieved all time record quarterly retail sales volume of 15127 units up nearly 15% year over year.
As we noted on our second quarter call in July we opened our first delivery and barge center in Greenville, South Carolina, which continues to ramp. According to our plan. In addition, we opened another retail store in Houston, Texas in September and our latest retail store in Nashville, Tennessee, just last week.
Before the end of the year, we expect to open two more retail stores, one in Plano, Texas, the other in Atlanta, Georgia, as well as well as at least one additional delivery by center, we remain on track with our Echopark expansion plan and we'll continue to keep you updated on our path to 14 billion in Echopark revenue by 2025.
In addition to our exceptional store performance during the third quarter, we continued improving operating efficiency throughout our entire organization.
Adjusted EPS generic expenses as a percentage of gross profit were 69.1% down 760 basis points from the prior year. We continue to expect to achieve permanent gas unit expense reductions of approximately $7 million per month were $84 million annually on a go forward basis.
In recent months, we've seen more car buyers open to a wider range of shopping options across the omni channel spectrum. This includes increasingly utilizing a combination of online phone and in person shopping to complete a vehicle purchase several recent studies support our belief that the bad if consumers prefer to begin.
The car buying process online then visit the dealership to get access to support from knowledgeable associates, and then have the ability to shop physically shop large inventories and finally test drive the vehicle before purchasing in addition, our guests continue to tell us that price and quality are the most important fact.
<unk> when selecting a used vehicle. This is exactly the value proposition offered by Echopark and we firmly believe that our pricing strategy, coupled with our hybrid approach between online and on site offers consumers the car buying experience they want as evidenced by yet another record quarter in Echopark.
As we continue to provide our guests with additional buying options. This will accelerate our echopark network expansion plans as well as enhanced our guests online retail experience at our franchise dealership web sites and Echopark dotcom.
Given that we are pleased to announce today that we recently hired Mr., Steve Whitman, formerly a purchase the Hertz organization as our new digital or Chief Digital retailing officer, and Mr., Stephen Conrad firmly with Gulf Department stores, as our Vice President of E Commerce to oversee the ongoing development in future evolution of our omni channel.
On a platform.
Each of these individuals brings extensive online retail experience to our company and we look forward to their contributions in further improving our overall guest experience.
As we move forward, we believe sonic in Echopark are well positioned for the future growth and success.
If the pandemic today, our management team is taking the necessary steps to strengthen our operations and take care of the health and safety of our teammates and guess while also positioning the company to benefit from the economies eventual recovery. We believe the automotive industry is at an inflection point and we intend to capitalize on this momentum with both Echopark and our.
Sonic franchise dealerships.
Now I'd like to take the time to thank all of our teammates at the franchise stores in Echopark stores, where their relentless commitment to deliver our exceptional guest experience while executing our safety protocols I also want to thank our manufacturing vendor partners for their unwavering support this.
This concludes our opening remarks, we look forward to answering any questions you may have.
At this time to ask a question you won't need to press star one on your telephone keypad that is star one two we draw your question press the pound or the high ski please stand by while we combine the two and a roster just wouldn't.
Please.
Your first question comes from Rick Stephens Rick.
Nelson with Stephens.
All right perfect all right good morning.
Right.
Oh pardon echo.
Echo Park, Yeah terrible problem.
Carter's hers, where you calling the corridor.
Sorry.
No you took down your guide or her Robinson units from them probably Oh.
For the year.
[laughter] codes or Texas.
Yes. So that's just it's a great question, Rick and parents and that the Q.
23, it's been a really interesting year for us used car geeks right cobot set aside.
The inventory in particular on from a pre owned perspective, it's been all over the board.
And what you might not know whats going into may sort of through April our our floor plan for most of a lot of the franchise stores. All the Echopark stores was a floating for playing with a 30 day look back so what really what were we all doing in April we were selling down inventories preserving liquidity, because we didn't know how long.
The company deals in Alaska. So we got to me first and we had a point on May Twentyth, where the four claims when you adjust basically drop or borrowing capability by.
From a four point perspective, so we see I think if you can refer to page 46 days at 46 in the deck correct. You can see it's a great time to buy pre owned cars was during that time and we couldn't do it.
So we really had to maintain liquidity plus a deal with a floor plan issues that we have but heath Byrd and the whole team went to work with the banks and now we've moved from a floating for planned have been specific and its triple the size. We have to we have been a four point now for the foreseeable future. So we're in real good shape, there, but by the time, we got the four point handle it was.
<unk>, we could start buying now all of a sudden you've gone from historically low rate historically drop in terms of a wholesale pricing to now historically high increase you know some hundred and 40% of the market versus freak out good and so really interesting interesting time, because we've kind of got our hands tied.
Had we not been we'd obviously bought more cars during during the.
Opportunity period, we're because we're a lot cheaper having said that if you think about it we opened four stores during that time frame for Echopark stores. We did set all time revenue in all time volume Records.
Okay.
Aim we remain profitable.
There is some indication how strong the brand does and how strong the model, but it's I don't know what is our hands were really tight and so now what's great is the markets dropped back down I think it's about 200 Bucks above where we were and were off to the races again the volumes back the margins coming back it did leak over a little bit into October. So we have a little margin pressure for the first three weeks of October that's that's coming back.
In the fourth thing now is that we're basically opening in Echopark store every 15 days for the foreseeable future on average and it's just one after another and if you look at our last two openings like I mentioned in my opening comments, the Houston southwest or a module, which is another store already in Houston, but the usage.
From a store, it's going to be in the 375 to 400 car arranging their first opening month that means they were profitable in month number one and then our national store that just opened last week, they're they're selling cars and on a pace for over 400 car pays for it for an opening months were real excited to see what they do in there.
Number so.
You know its a little blip, we're still very excited about the volume they were able to get out given the constraints that we had and look forward to having a great Q4. The interesting thing is that when you look at it if you run a short day supply.
Which we do and you're buying cars all at the high you know you actually had a point where the wholesale prices were more and someone running a long day supply in their retail prices. So in other words, it was possibly more to barack or in some of those that were had 40 50 60 day, a day supply, but they said.
We felt the carrefour and so what's going to happen now isn't going to go into the fourth quarter EPS.
Most of those companies that are on long day supplies bought a bunch of cars in August which I suspect. They did because sales were so good in July and August then there are going to have to deal with that situation in the fourth quarter and that's behind US now. So we're excited about where we are we're excited about that.
And were seeing on Echopark, it's rocking and rolling again, and I'm, just not a crazy time buckets handled and we're moving forward.
<unk> expenses heat I'll just add in if you look back at the Manheim and you look at the trends. This is only happen it's never happened the disability, where the wholesale retail correlation with so far off you had a little bit in 2008 and nine I'm sorry.
So it really was for the quarter and Black Swan event and is resolved then for plan gives us plenty of room to grow and as as Jeff mentioned this is behind us.
[laughter] you could also I would comment on that.
Bill let me.
[laughter] demand that were seeing both new and used cars or it's got really strong I know suppliers have been tight.
Uh huh.
This is a multiyear ah demand.
Right.
Tailwind or whatever.
A couple more short term.
Well, let's address new first availability is coming back I think we've got a thousand or 1200 more cars on the ground at this point than we did last month at this time and that just keeps improving every month manufacturer is doing a great job getting inventory back in our hands. The demand is there and I think we'll all be Bakken enrolling as we move into the first and second quarter of next year.
As as supplies Bill from used car perspective, Yeah. I've said this since you've known me there's never we don't ever have a problem buying cars, sometimes you have to pay more for them. Sometimes you pay less we had a problem. This time, because we didnt have any floor plan availability, but other than that that's all resolved.
But if you go back and just look historically and in particular, what is historically one to four year old cars under 50000 miles to the supply is endless we can by force all day long that's the beauty of our model because when you mix the franchise business with Echopark and I have access to all that inventory.
Just don't have a problem buying inventory. It's just it's never been a problem. The inventories there. It's a matter of fact, if you charge. It out we parted out and you look at inventories supply and that supply range.
It's a flat line across the board on for years and years. It just we just there's not very many blips, there's plenty of inventory out there I forgot that know how to go get it.
Correct.
You heard these new digital exactly dozens or is the goal.
To provide that.
One purchase homes and I fell apart.
If that's the case what kind.
Timeline to get that up and running.
Yes, so we have it today right you can go on to Mercedes Benz or Denver, or you can go on to Echopark Greenville, and you can see examples of how a consumer can go end to end, but.
But our definition of that is a little different than than maybe what I've heard so far our definition has is to make it really easy and that if a consumer wants to which is less than 2% of the population right now, but if the consumer wants that can go online Wyatt Carr from end to end no touch points right no touch points the best in class right now has 10%.
15 touch points and and so we're building out what we have we're building out a solution that allows the consumer to go end to end with no touch points by vehicle do it very easily very few clicks.
And deliver on that promise.
We're a little bit away from that I mean, hopefully we can deliver on that sometime towards the end of next year, but in between now and then we certainly have a robust environment, where the consumer can go in there got to be touch points, just like any of our competitors.
And we can deliver a car and we have customers coming into day and some customers are are doing I think about 15 to 16, 17% of our customer base right. Now is completing some percentage of the transaction online before they come to the store to pick it up and I've heard those numbers and ranges from some of our competitors and reporting so I think thats sort of the the.
The overall a bucket of consumers right now that want to do that is that going to grow in the future who knows but we're going to be ready for it if it does and that's why we've added Steven Steven they come with incredible pedigrees. The their resumes are fantastic and they snap and fit right into what we're trying to do.
And we will introduce.
And to you on the call next time and they can start answering the omni channel questions as we move forward.
That sounds great I wonder if I could ask you about the new delivering abide center Green Bill you mentioned that Oh, how that's performing.
The rollout plan sounds like you're going to add one more that is prior to the end of the air.
Yeah, we're probably going to have Knoxville, we're working on that right now we've got a couple a couple of opportunities, we'll see which one fits the best with the National story, we're trying to let it get up and running and its up and running pretty quickly here Greenville is doing great. We sold 80 cars last month.
Out of the store if you think about it.
Average new car dealer and used car store sell 69 cars a month, we sold 80 and just our first month out of the shoot here and so we're real excited about it we think that that market can bring 200 300 cars a month as we get better at our execution, there and then sort of the hub and spoke model will come to life.
You can picture Nashville, and look at Memphis, Knoxville, and some Kentucky markets Lexington, we're going to we're going to be able to deliver into those markets a lot cheaper remember in Greenville rationally using an office at one of our stores there and we delivered 80 cars. There we have no overhead no no.
So it's such a great model and we look forward to open up a bunch of those next year as we move forward.
And it just puts US right in line if not ahead, a little bit of pace to hit our 140 stores and that 14 billion revenue number if not better by 25.
Great.
Thanks, a lot and good luck guys.
Thank you so much Rick.
Your next question comes from Red Dot Gill with JP Morgan.
Hi, good morning. Thanks for thanks for taking my question I'm just kind of question on you know just what you're seeing in terms of just near term demand trends you know how how October looked like Oh for you you know both no news to parts and services like.
Those volumes.
Through some quarterly levels and then.
On parts and services or how do you see the recovery shaping up here you know, particularly.
So we would lower miles driven you know potentially likely likely to be lower here you know for the remainder of the quarter you know as no more shutdowns come into place.
Just curious your thoughts there you know as you go to 2021 also.
I mean, how how much a function.
His miles driven you know how much of that goes into the equation.
For the go to that business and how much is likely independent of miles driven more on like this.
Comp expenses actions or even like weekly complexity et cetera.
Yes, no. Thanks for the question. So let's address fixed operations first we were actually up year over year by 3.6% I think in September.
That's great maybe an <unk>.
A day's difference in October so I think we're going to be maybe down one or 2% for the month, we'll see when it all I mean, it all finishes up.
But but fixed operations is coming back is coming back slowly.
Slowly, but surely and if you'll remember back when we started projecting.
You know kind of what was going to happen with volume fix we said fixed a while back it was going to take a little bit longer because of the things that you just mentioned the other thing too is our exposure in California is quite high and we've had more shutdowns out there I'm done anywhere, but that market is a little bit topsy turvy when it comes to that a lot of less driving so that.
Issue, certainly certainly going on.
From a used to new perspective, the business keep just getting better and have comment on both echopark and Sonic automotive in particular with Echopark in October now that we've got that fore plan issue resolved and our inventory levels are or backup where they're supposed to be of the engine is really rolling again, and you know I think.
5200, 5500 cars for Echopark at October is a pretty decent range and certainly pushing for north of 16000 cars in the quarter.
So we're excited about that sort of where we should have been last quarter had we not had that had the slowdown there from is that from the floor plan. The new car business is a function of the demand is there. It's just a function of inventory there.
During the quarter, we get we're selling it and the margins, which is great. Because I think we all understand here the margins are a little tighter and tighter and the margins are.
We're still really good were little over 2600, a copy I think for the quarter and and and it's going to be a strong again in the fourth quarter and what you. What 40 20 was a crazy here right, but we've cut so much cost and we got our our revenue engine going in particular with Echopark, the 20 one's going to be a great year.
You know the shutdowns if they happen again, we're a lot more educated on how to deal with them. We've got a whole different cost structure work just on the the economies no better prepared to deal with it and so if it happens it happens we'll all as we've all done will stay strong as we move through this but.
We think 20 one's going to be a fantastic year 2020 is by far and away is going to be a record breaking year for us from an EPS perspective and we.
We expect to do that again, even better in 21 with great volume growth and just a fantastic growth having echopark.
Got it that's helpful on Echopark EBITDA are you.
New York, you extreme loading issues that happened in the third quarter.
Should the fourth quarter EBITDA.
Is that expected to get back to you know the prior run rate of like say five 6 million.
EBITDA or you know should we consider any offsets given to that.
Doors opening up and.
Just looking into 2021, you know not not.
I appreciate you cannot guide but.
Is that exit rate of Echopark like a good starting point to as you.
No when you look or looking to 20, joining warm EBITDA potential for Echopark, just any color on the puts and takes there would be helpful.
Yes, so your here's how I would look at yourself kind of guide you. There you know we had still a little bleed over from from inventories.
From September into October so the first few weeks of October still.
Still difficult margins, but that finishing now it's not done right now and so November and December should be back on our normal EBITDA pace. However, you need to remember good work celebrating our openings right. So the model that we got used to in 2019 and throughout 2020, we got that.
5 million and EBITDA were accelerating our openings and what that means is I'm carrying people I'm carrying managers on Monday.
Employee list now that I'm going to I'm going to deploy in the next six to eight to nine months. So we got a little bit of a carrying cost as we expand the revenue and that's just natural that's just common sense that that's going to that's going to happen. So no I would expect a better Q4 from an EPS.
It off perspective than what we saw in Q3, and then I would suspect because the ramp ups are so much faster or the last couple have been really fast and Houston and Nashville in terms of getting to profitability I don't expect the lag these three and four and five month lag to get profitable as we move forward in the course of the.
Delivery centers are profitable almost immediately as well so I mean, I'm not afraid of that 5 million 6 million EBITDA quarter and still in growing like we're going to grow but you know keep in mind that the growth is going to include having us hire people ahead of time and ramp up to get ready for these store openings.
Jeff This is Danny just to add to that in the third quarter, we had a million eight of EBITDA drag from those new openings as well and we had about $5 million of growth because of the margin pressure, we talked about at Echopark that we lost in that quarter. So that 3.1 million actually EBIT that you see is reflective of both of those as we go forward and you're still going at the drag from new openings, but.
That those margins normalize here coming out of October actually give us some upside.
And the new openings you know the delivery by centers are real inexpensive to open let's take.
It's either a rent we either own the property or into leads and we're talking about maybe $2 million to get a store opening three at the most versus your traditional echopark store that's anywhere from 10 to 20, depending on the size of the store.
Got it got it do just the last one from me you know on the M&A side.
I mean, because you did not have like the.
Similar kind of like gross margin tailwind.
As some of your competitors you know.
Is this kind of like I mean, you said on the new side, probably but.
How should we think about the DNA to gross progression there no.
I mean, you've talked about 70% to 73% in the.
Passenger normalize basins like has that has that thinking changed at all or.
Are you still on track to hit that kind of number here you know.
On a normalized basis.
Yeah. This is here if you look at the fourth quarter is going to be very similar to Q3 from a percentage of ashamed to say gross and then as you go into 2021 I think if you look at the total year. This year, it's going to be around 73.
For the whole year, probably 69% and fourth quarter's level projecting and as you go into 2021, you've got to factor in that first quarter, where we did not have those annual savings that we got up to that if you think of that you're going to be looking at loads seven seventys as it.
On a gross for 2021.
Got it got it that's super helpful color. Thank you so much.
Your next question comes from John Murphy with Bank of America.
Good morning, guys.
Good morning, gentlemen, first.
Quick question on on Echopark.
I mean opening one store every 15 days is pretty impressive it's kind of you're sticking your planning teams accelerate a little bit but.
But when you think about human capital that needs to go into that store.
Kind of challenge at that pace, I know, you're saying you're carrying a backlog of folks, but I'm. Just curious how you are sourcing then I'm not sure you, calling people gms and that store, but your your equipment GM in that store, where the where are they coming from where is that backlog being built.
How do you get comfortable with that human capital that needs to go in which is obviously very important in any store.
Yes, John Good question. So part of that 1.8 billion is that drag of human capital right.
Engined earlier, Danny mentioned earlier and then what you have to remember is the delivery by centers the head count in those is about 10 people.
So it's not real real top heavy when it comes to head count right. Its very few people. So we're growing those internally and we haven't had a problem yet I mean, we were opening obviously you've opened a lot of stores here recently and are opening a lot more before the year's over.
And we're ready we already have those managers picked out and we've got demand has picked up over the next 10 stores are all working in our environment today, It's part of the drag that you will see on the EBITDAR carrying that channel and are well ahead of time to make sure that when they go into a store that can provide that culture, you look at our reputation dot com.
Scores at Echopark, and they're off the charts and you've got to have the culture and what we train our people to do we got to be able to move that from store to store to store. So we're we've been very very thoughtful about.
About the pace of opening and making sure that we carry that culture from from store to store to store, but I think it's real important to remember this is a part of that you know opening store every 15 days or so here the.
They are delivering by centers are a lot easier to open and a lot less intensive when it comes to personnel.
And I'm sorry, so all of those folks are coming from internal Sonic.
Stores at the moment is that is that is that a correct statement.
That is correct.
Okay.
Then second I mean, theres, a great debate going on right now on what kind of footprint, you need either or both and user knew whether a robust local geography coverage is good enough where you need to be.
At a national footprint in the region everybody I'm just curious what your thought is there you on your core dealer franchises as well as for Echopark.
Yes, I mean on the new car franchises, but to the franchise laws and the rules between the manufacturer to keep you from really selling cars all over everywhere.
Advertising cars over everywhere, that's a battle that I've seen coming as mentioned in previous quarters before it's going to be really interesting.
As as ecommerce grows and.
Our reach grows quite honestly.
Makes makes the idea of having fewer dealers even greater right.
And then from a new car perspective or from a used car perspective in particular I can work Echopark. It's just the distribution network, we need a distribution network that covers the entire United States.
We believe that every.
Mid major markets in the country deserves this brand and deserves the experience of this brand provides and we're going to do that and that's what our plan is by the time, we get to 2025 years to be serving a.
A majority of this country with the brand. So I don't think you can just do that with.
And you know.
Sort of recon centers all over the country. If you read the data and you look at what the consumers are saying the consumers are telling us they want to be able to search for inventory online, but they want to come to a store within associates. It's got experience dealing with the car that theyre looking at they want to test drive from a.
Big inventories it before they buy a car and make that decision our goal and our hybrid approach I'm from Adas. He is to allow them. If they want to go eight to Jay or they want to go agency. Our system is going to allow that to happen and so they can do it now in our stores and buy echopark by the end of the quarter, but it's.
Walkie right, there's still touch points all over everywhere just like there is any auto Taylor.
I might add in the country today no body not one auto retailers. The lives of car agency with no touch points. That's what we're trying to build as an option now it's a very small percentage of the borrowing base, let's still incredibly important to provide that experience and to provide that hybrid approach with a distribution network that allows us to touch every mid and major.
Mark in the country.
Just just a follow up to what you just said.
When you think about getting a deal done when possible.
Is there thinking about things being done purely online to go Thats. The F. night process is sort of the the last hurdle, where you lastly, you want to do is say no to somebody and then just lose them.
When you're interacting with them either on the phone or in person you have the opportunity to maybe shift them. If they can't get financed with the vehicle they want being kind of work into another vehicle that may be good for them. They get financed for it is that really just a major hurdle to getting this done completely agency on.
Line and how often do you does the financing discussion.
Hey, maybe go down to trim level or have you considered its other vehicle and you do that in the plight way not only need to consumer that would be very difficult to do in the online.
Yes. That's another good question, it's far too complex to do AIDC purely with no touch points.
That's why it's going to always stay a very small percentage of the consumer base will for the foreseeable future.
You do end up getting on the phone in and our Greenville store for example, you know.
Our our economic Department in our sales Department is here in Charlotte and we're delivering cars into into Greenville.
And doing a good job with it and our ethanol numbers haven't changed right. There's still that's the one thing I think we've all learned.
Is the more the business becomes online we can still sell ethanol products and as you know that's a real big part of Echopark profitability statement, it's all of that and so that was a big question Mark in our head and we've overcome that.
We're not worried about that as being a stumbling block for us any longer but it's going to be very difficult for me to believe that you're going to complete automotive transactions with the appraisal with the with the financing that you have to go through with something that gets turned down and you need to flip them like you were talking about and not have a touch point and do.
All that electronically hazy, but I do believe that you need to be able to offer in the experience, whether it's a dizzy or eight in Q experience needs.
Needs to be easy like Amazon right.
We have very few clicks.
Clicks and to get the consumer to a point and then when they arrive at the store to take off from that point and has the exact same or better experience online is it as you have at store level and those are the things that's why we're making the investments and Steven Steven why we brought them in because we feel like long term.
We need that expertise to find at an Amazon or you find it a google or whatever.
Can help us look at it just a little bit differently versus looking at it through the lenses of a of an auto retailers in all our retail I don't care. If you are the best in class or not.
All experiencing the same thing and we're going to work very hard to make it a lot lot more simple for the consumer to have a great experience Oman and John This is Keith I'll just add we talked about these expense reductions and the majority of that's been through productivity and we all see believe regardless of the percent.
It's against them eight as the more you can get from eight A.J. are all further down the line it makes us that much more productive and so.
Forget about the consumer experience, which we absolutely want to provide.
Devotee standpoint, the more we can do on line the better it is for us and so it's a very integral part and yes, you may as well and I do believe I completely agree with Jeff is very complex algorithm to solve but their technology is coming out with AI et cetera, where you can start getting them further.
Down the line, even when there is questions about financing so yes.
Yes, it's going to be an evolution and were committed to that.
Okay and then just that's very helpful. Then just lastly on on used vehicle sort of heartburn you had in the quarter with you'll get a little bit short of.
The floor plan financing no no thats worked out.
It's it's very likely that used vehicle pricing will be somewhat volatile going forward I mean, there's just some some factors that are likely to drive that.
Just curious if you think about now that you've got through that Harper under the floor plan side has.
Has anything changed in the way that you would manage your used vehicle inventories or is it still hey, I'm going to stay in 30 to 45 day window not get beyond that keep it tight and that's the best way to do it because you're kind of saying, yes, but.
But it had been due to inventory, we're doing better because they had cheaper inventory to sell out of I am just curious if anything has changed there or we should think about it in the same way.
No I mean look at the end of the day, if we'd had the floor plan in the process the prices drop like that to historically low levels. We knew wouldn't stay that way. We just bought the hell out of it we had a much higher day supply.
That was not that would've been a prominent in most of our competition didn't look at all the day supply numbers that they've announced they're much higher than where we are we are we at a point when we got to the end of April we had 15 that we had some regions within Sonic and Echopark sitting at a 15 day on lot inventory in our Dallas stores you saw on our charts that's why.
Got down to 500 cars and we're just managing that for quite as best we could and we just had to fight with one hand tied behind our back but to be able to do that still come out with an all time record what was just amazing and again ended stay profitable during all that because the margins really took a hit when you had to buy all that inventory when the market.
120, 30, 40% above so.
We would we would buy inventory during a downturn like that and we adjust our day supply accordingly, and have more inventory on the ground no problem, which could.
Well and that's good news and I'll add that this was a one time black Swan event. So yes, we'd had the foresight and the full plan, we would have changed our model at that point, but yes, 99.9% in the time for the last four years. That's short day supply is the best way to run your inventory and be profitable.
Got it yeah that makes sense. Okay. Thanks, so much guys.
You bet.
As a reminder, if he would like to ask a question. Please press star one on your telephone keypad that is star one on your telephone keypad.
Your next question comes from Bret Jordan with Jefferies.
Hi, Good morning, this is mark Jordan on for Brett.
Most of my questions have been asked here, so I guess I'm just.
Two quick ones, so thinking about new inventories I guess.
Where did you end the quarter for days supply and where should we think about inventories getting back to more normalized levels is that kinda early next year and I guess I'll piggyback on that with you know.
New Gpus were pretty strong during the quarter do we expect those moderate sequentially or do they kind of stay elevated again in Q4.
There are new car day supply was 43 days to end the quarter at that's going to continue to get better as we move forward, but we're going to do our best not to bring inventories back as high as they were I think everybody's going to be doing that including most of the manufacturers.
The margins are going to be good this quarter for new I mean, they may not be quite as robust as they were in the third quarter, but theres still tracking to be really nice.
I expect that to last through the first quarter, two and if the manufactures behave appropriately and they don't oversupply.
We can all have higher margins and they can have higher margins, we can all make more money.
The problem is is when they get into oversupply and cars and and and all of a sudden here come all the games with incentives and all the baloney. It makes it a lot more difficult. So I think we've got a good couple of quarters ahead of us with much better margins better inventory management and hopefully the world learns from that.
And we continue forward with that.
Okay, Great and then just one more thinking about half an eye per unit on the franchise side I guess, it was up nicely year over year down a bit sequentially, but thinking longer term how should we think about the opportunity there to continue expanding the F nine per unit.
I mean look we've got some of our competitors up over $2000 copy and that's where we're headed as well I think there's tons of upside we continue to improve every month, we get a little better in a little better as an organization and october's no different mix gets a little better and we expect that to continue.
So I think there's a lot of upside and when you place that upside couple of hundred dollars a car on the kind of volume that we do and that's a big number.
Okay, great. Thank you very much.
You bet.
There are no further questions at this time do you have for further remarks.
They'll just to thank everybody for listening in and we will.
Back to you on the next call.
Thank you. This concludes today's conference call. Thank you for participating you may now disconnect.
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