America’s Car-Mart fiscal first quarter income rises 54%

Bentonville-based America’s Car-Mart is off to a good start in its fiscal 2017 with first quarter net income of $7.109 million, or 87 cents per share, up 54% over net income of $4.616 million a year ago.

The strong quarterly results were attributed to better lot management and improved payment collections as the used car dealer sold 11,957 cars and trucks during the three months ended July 31. Total revenue rose to $145.84 million, up 2.2% from a year ago.

“We are certainly happy to see the improved bottom line and are very appreciative of the efforts of all of our associates as they work tirelessly to help our customers succeed.  Also, it was nice to see growth at the top line and positive same store sales for the quarter. Our top line growth when excluding the effect of the four dealerships closed in fiscal 2016 was 3.2%, which is moving in the right direction for this environment as competition continues to be intense,” said CEO Hank Henderson.

Henderson said the company expects to see competition rationalize to a degree which will give Car-Mart an opportunity to increase sales volume productivity especially at its older more mature dealerships. He said there continues to be strong demand as evidenced by the increase of about 1,900 active accounts during the quarter. Henderson said Car-Mart has more than 66,900 customers on its books.

President Jeff Williams said there will be more lot level blocking and tackling in the coming quarters because it is working.

“Our gross profit margin percentage improved to 41.8% from 38.7% for the fourth quarter of 2016, and our net-charge-offs improved to 6.2% from 7.8% for the first quarter of 2016 and from 9.0% for the fourth quarter of 2016. These improvements are the direct result of intense focus on the overall quality and consistency of our inventory management and our collections practices,” Williams noted in the release.

Car-Mart grew finance receivables to $460.57 million in the quarter, up from 7.6% a year ago. Average purchase prices rose to $10,393 in the recent quarter, up 4.3% year-over-year. Same-store revenue growth fell 0.4% as there were 3.5% fewer cars sold per store per month in the quarter.

Car-Mart beat Wall Street expectations on the bottom line as analysts’ consensus was 46 cents per share, but revenue came up shy of the $154.36 million forecast by the analysts. The better-than-expected results sent shares a little higher in after hours trading. Shares (NASDAQ: CRMT) closed Thursday (Aug 18) ahead of the report at $32.33 per share, up 21 cents. Share traded after hours at $32.46, up another 13 cents.

The stock price beaten down last year from lower profits has rallied in recent months climbing 39% since mid May. Year-to-date the stock price is up 20.89%. For the past 52 week period shares have traded from a low $19.49 to a high $43.27.

“During the quarter, we repurchased 273,092 shares (3.4% of the outstanding shares) of our common stock for $7.2 million at an average price of $26.23 per share. Since February 2010, we have repurchased 4.4 million shares (38% of the outstanding shares) for $142 million at an average cost of $32.09. We plan to continue to invest in stock repurchases opportunistically as we move forward,” Williams said.

Despite the strong cash flow and improving balance sheet, CL King remains on the sidelines rating the stock neutral for investors because of the pressures it previously faced with margin compression. King analysts will re-evaluate the company following the earnings call that Car-Mart executives hold with analysts on Friday morning (Aug. 19).

“We ended the quarter with debt to equity of 51.2% and debt to finance receivables of 25.5%. During the quarter, we increased financed receivables by $23.3 million, increased inventory by $3.9 million, repurchased $7.2 million of common stock and had $523,000 in net capital expenditures, all with a $9.6 million increase in total debt. We will continue to maintain a strong balance sheet,” Williams said.