Car-Mart Posts Higher Revenues, Lower Net Income

Revenue rose and profits shrank, but America’s Car-Mart said the quarter was still a solid one for the Bentonville-based used car chain.

Car-Mart posted second quarter net income of $7.53 million, down from $8.1 million one year ago. Revenues climbed to $122.54 million, well ahead of the $110.0 million earned in last year’s second quarter.

Same-store revenues grew 5.6% on a year-over-year basis.

“We are very pleased with our top line growth for the quarter. Our general managers continue to work hard at helping our customers succeed and are meeting the challenges of the current competitive environment head-on,” said CEO William “Hank” Henderson. “We are determined to earn the repeat business of our customers by doing everything we can to help them purchase a quality vehicle with affordable payment terms and excellent service.”

Henderson said the financing environment has stiffened this year, a trend he has noted in previous quarters. He said funding in the sub-prime auto industry was creating competition.

“Even though our revenues were up, we feel like we could have done even better as we believe that increased funding to the sub-prime auto industry continues to have a negative effect on our business especially on the provision for credit losses line,” Henderson said. “We believe that many companies that are competing for our customers on the funding side are not focused on earning repeat business tied to customer success. We believe that by helping our customers successfully complete the terms of their contracts, which has always been and will always be our primary focus, we will continue to fulfill our vision of being the most respected buy-here-pay-here organization in the country.”

Other financial highlights from the quarter included:

• Retail unit sales increased 9% to 10,643 from 9,753 for the prior year quarter;
• Average retail sales price increased $252 to $9,836 or 2.6% from the prior year quarter and decreased $127 or 1.3% sequentially;
• Net Charge-offs as a percent of average finance receivables of 6.2%, up from 5.9% for prior year quarter;
• Provision for credit losses of 24.3% of sales vs. 22.0% for the prior year quarter; and
• Debt-to-equity of 47.3% and debt-to-finance receivables of 26.2%

America’s Car-Mart shares (NASDAQ: CRMT) closed trading on Monday at $43.11. The company’s stock has traded between $35.89 and $50.59 per share during the last year.