Jeff Dyke, Sonic's executive vice president of operations, said, "Our Houston stores continue to struggle and BMW, which is about 30 percent of our profit structure, continues to be a major challenge." Through September, BMW brand's U.S. sales fell 4.3 percent, vs. an industrywide drop of 1.7 percent.
“We have two big BMW stores in Houston," he said on a conference call. "BMW is at the bottom of their cycle in terms of their product. There is a lot more [new] product to come as we get to the middle and end of 2018. They are a third of our profit so we continue to struggle. But they have a great leadership team. We expect [BMW sales] to continue to be a struggle for us until the middle of next year.”
Hurricane Harvey closed all of Sonic's stores for about a week in August, Dyke said. Nearly 20 percent of Sonic's store count and 30 percent of its profit comes from the Houston market. Business picked up there toward the end of September, he said, as stores rebuilt their inventory, aided by Sonic's stores in other markets.
"We anticipate the retail activity in the Houston market in the fourth quarter of 2017 to continue to be favorable as those affected replace and repair vehicles," Dyke said.
Dyke said the after-effects of the storm on sales will benefit Sonic through October, then wane in November, but December should be a normal month comparative in activity to previous years.
Hurricane Irma's impact on Sonic's operations in Florida, Alabama and Georgia was "less significant" than Harvey's effect, Dyke said. As a result, Sonic did not see a rebound in business to the same degree it did in Houston after the storm.