Car-Mart Shares Fall on Dip in 4Q Profit

America’s Car-Mart Inc.’s report of a 53.7 percent drop in fourth-quarter profit sent share prices down more than 15 percent Tuesday morning.

The Bentonville-based used-car dealer, reporting late Monday, said it earned $3.35 million, or 40 cents per share, for the quarter that ended April 30, compared to $7.24 million, or 81 cents per share, a year earlier.

The company missed the average earnings estimate of 50 cents per share from four analysts surveyed by Thomson Reuters.

Revenue, from both sales and interest income, rose 12.5 percent to $154.75 million.

The company focuses on the “buy here, pay here” segment of the used-car market, providing financing for most of its customers. Operating in 11 states in the South and Midwest, Car-Mart opened its 147th dealership Dec. 18 in Milledgeville, Georgia.

The number of cars sold grew 5.5 percent in the quarter, to 12,345 from 11,699 a year earlier. Average sales price increased 6.3 percent, to $10,641.

CEO William H. “Hank” Henderson said in a news release that “while the operating environment continues to be challenging, we are doing a lot of things right, and we are excited about the direction we are headed.”

Sales volume improved “driven by solid results for our older dealerships” and “30-day plus delinquencies” were at the lowest level in five years.

However, “competitors are pushing hard, and in many cases enticing some of our good customers to default with us,” Henderson said. Because of the shortfall in operating results, the company has slowed on opening dealerships and has been working to improve existing dealerships.

In the release, Jeff Williams, president and chief financial officer, said, “We believe that we have a very lean but effective structure in place that can support the business as we continue to grow. We can and will get better along the way but, realistically, as long as competitors are offering what we consider to be unsustainable deal structures, we will continue to face headwinds related to credit losses.”

Because of the credit losses, the company will increase its contract interest rate from 15 percent to 16.5 percent at the end of May. Also, it has closed four smaller dealerships in Tyler, Texas, Atlanta, Texas, Cushing, Oklahoma and Trumann, Arkansas.

Car-Mart’s shares were at $23.18, down 7 cents or .3 percent, when trading closed Monday, but by Tuesday morning, had fallen to $19.67, down $3.51 or 15.2 percent, on the Nasdaq.

Shares have traded between $19.49 and $56.59 in the past year.