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New Strategy Helps Sonic Achieve Higher Profits in 2007

March 3, 2008

CHARLOTTE, N.C. — Sonic Automotive Inc. reported on Tuesday slightly lower fourth-quarter profits than in the previous year, but higher profits for all of 2007. Contributing to the full-year results, company officials said, were new tools the company implemented, including a new F&I menu.

Company officials said the strategy is focused on areas with the most profit potential, such as the Internet, F&I and e-commerce. And with the 2007 release of the dealer group’s F&I system, the department recorded a record year-over-year increase in performance of 9.7 percent.

"Our key operating initiatives continue to drive our results … even in a challenging new-vehicle sales environment," said President and Chief Strategic Officer B. Scott Smith. "Continued implementation of our used-vehicle merchandising strategy drove same store used-vehicle revenue up 19.3 percent compared to the fourth quarter of last year. Our brand and geographic diversity, along with our initiatives in the higher margin segments of our business, continue to provide us with the flexibility to respond to changing market conditions."

Sonic said it will soon launch improved technology and processes to support traffic management, CRM, service business, advertising and more. Company officials added that a key target this year will be the Internet.

“We’re investing more than ever before in our infrastructure to enable digital marketing,” said Smith, explaining that about 88 percent of Sonic’s customers begin their car shopping experience online.

Net income for 2007 for the Charlotte-based retailer was $95.5 million, up 17.7 percent from $81.1 million in 2006. The retailer also reported roughly $23 million in net income for the fourth quarter, down 0.9 percent from about $23.2 million a year earlier. Used-vehicle sales were up 19.3 percent while new-vehicle sales were down 2.6 percent.

Officials said the company, which operates 169 franchises and 34 collision repair centers, may sell some stores this year to offset what is expected a challenging year for new-car sales. Focusing on the used-car segment will also be key this year, officials said

"We expect to see continued softness in new-vehicle sales during 2008, which will be largely offset by growth in our used-vehicle and parts and service revenue,” said Smith. “In addition, we are considering changes to our group of stores held for sale, including the potential sale of a number of profitable, well-managed stores that no longer fit our business model or which require capital expenditures that do not make sense for us."

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