Car-Mart’s Earnings Take a Rough Turn

A rough fourth quarter dented America’s Car-Mart’s full year earnings.

The Bentonville-based “buy here, pay here” used car dealer reported full year net income of $21.1 million on revenues of $489.1 million. One year ago, Car-Mart posted profits of $32.2 million on sales of $464.7 million.

Identifying the root cause of the profit decline wasn’t hard.

“Net charge-offs were higher in the fourth quarter than we have typically seen, and we have tried to take the necessary steps to improve in this most important area of the business,” said America’s Car-Mart CEO Hank Henderson. “The bottom line is that too many of our customers did not successfully fulfill the requirements of their contracts.”

Henderson said competition from other dealers who were more willing to make deals put pressure on Car-Mart and would cause the company to remain very selective in its ongoing efforts.

“The higher charge-off levels led us to be more disciplined with the structures of our fourth quarter deals and we are confident we will see improvement in customer success rates as a result,” Henderson said. “Holding a stronger line for better deal structures, however, contributed to the top line challenges we experienced as we did forego some sales opportunities to assure better success rates for our customers on these most recent sales. We intend to continue to push for better deal structures but at the same time remain aware of the necessary balance for the sales side of the equation. We remain committed to growing our business the right way by setting our customers up to succeed so that we will be in a position to earn their repeat business in the future.”

Other financial highlights included:

• Retail unit sales decrease of 1.9% to 10,565 from 10,767 for the prior year quarter with 26.9 retail units sold per dealership per month down from 29.4 for prior year quarter
• Average retail sales price decreased $178 to $9,785 or 1.8% from the prior year quarter and increased $46 or 0.5% sequentially
• Opened four new dealerships during the quarter – dealership count now at 134
• Active accounts base now almost 61,000
• Reduced total debt during the quarter by $17.3 million

Car-Mart officials also said they intended to slow their rate of growth in the coming year. Henderson said the company planned to open eight new dealerships in the next fiscal year.

Shares of America’s Car-Mart (NASDAQ: CRMT) closed trading on Tuesday (May 27) at $40.53, but shares were trading nearly 14% lower in after-hour trading. The company’s shares have traded between $34.56 and $47.93 during the past 12 months.