Car-Mart shareholders see gains as stock price rises, U.S. auto sales rate falls

Shares of America’s Car-Mart have been rising steadily since late February, pushing the value of the stock held by shareholders on an upward trajectory.

On Wednesday (July 5), the Bentonville-based buy here, pay here used car dealership (NASDAQ: CRMT) had a market cap of $293.2 million, with shares trading at $38.75. The market cap represents the total value of all outstanding shares at a given time. The stock closed at $38.90 on Monday.

Between December and February, Car-Mart shares had been declining since reaching a peak of $47.75 in heavy trading Dec. 7. But shares fell sharply after the market closed Feb. 17, and Car-Mart reported earnings late Feb. 20, announcing the closure of three dealerships and that third-quarter income declined 30%. On Feb. 23, another day of heavy trading, the stock hit a low of $30.85. In the past 52 weeks, the stock’s lowest point was $27.63, 40% lower than its July 3 closing price. On May 24, 2016, the stock closed at $19.49 before starting the rise to its December peak.

Yet since Feb. 23, the stock has been steadily making its way back to $40 per share. On July 3, the stock hit a three-month trading high of $40.60. On May 17, the stock tumbled to a three-month low of $33.80, but quickly rebounded by May 23, reaching $40.20 in heavy volume, before closing at $37.40. On May 24, in another day of heavy trading, the stock closed at $38.90. These high volume days came after Car-Mart reported it ended fiscal 2017 with a 74% increase in profit, beating analysts’ estimates.

Earnings for the fiscal year, which ended April 30, were $20.16 million, or $2.49 per share, up $11.55 million, or $1.33 per share, from the previous fiscal year. Revenue rose 3% to $587.75 million. The company also noted it was closing a Missouri dealership but opening one in Arkansas. At the end of fiscal 2017, the company had 140 dealerships, down from 143 at the end of the 2016 fiscal year.

TOP SHAREHOLDERS
As of June 9, Car-Mart had 7.56 million shares of common stock outstanding. Invesco Ltd. of Atlanta owned 13%, or 980,551, shares of the stock, according to the company’s proxy statement. The total value of the stock as of the previous market closing date was $38.14 million.

Magnolia Capital Fund LP, Magnolia Group LLC and Adam Peterson, all of the same address in Omaha, Neb., own about 11%, or 826,885, shares. Total value of the stock was $31.99 million. On June 20, the company purchased 4,323 shares for $36.75 per share.

Bares Capital Management Inc. and Brian Bares, both with the same address in Austin, Texas, own 10.5% or 793,145 shares, with a total value of $30.85 million.

Comparatively, if the stock was still trading at its 52-week low of $27.63, its value for the previous shareholders would be 40% less than it is, or $27.09 million, $22.72 million and $21.91 million, respectively.

The company’s directors and executives own 11.7% or 958,663 shares, at a value of $37.29 million. William “Hank” Henderson, CEO of Car-Mart, has 4%, or 312,440 shares, valued at $12.15 million. Board member Daniel Englander has 3%, or 230,479 shares, at a value of $8.96 million. Jeff Williams, president and chief financial officer, has 2.4%, or 183,884 shares, with a value of $7.31 million.

In fiscal 2017, Henderson and Williams received no salary increase. Henderson’s salary remained at $466,400, and Williams’ salary, $367,290. Total compensation for Henderson was $500,809, and Williams’ total compensation, $400,488.

The company will host its annual shareholders meeting in Bentonville on Aug. 2.

SALES RATE FALL
The U.S. automotive industry saw the seasonally adjusted annual rate of sales fall 1.7% to 16.5 million units in June, from 16.8 million in the same month last year, according to Jefferies equity analysts. This was the sixth consecutive month the rate has fallen “in what remains a soft landing.”

“Discipline cannot avoid a downturn, but June data suggests solid financial results ahead in (second quarter) reports,” according to equity analyst Philippe Houchois of Jefferies.

Auto sales fell 2.6% in June to 1.47 million units. GM volume decreased 4.7% in June, from the same month last year. Ford volume fell 5.1%. Volumes for Nissan and Toyota were up 2%. Honda sales rose 0.8%.

Except for domestic vehicles, incentives have continued to flatten over the past months, Houchois said. Average incentives rose 14.2% to $439 in June, compared to the same month in 2016. Inventory for GM vehicles rose to 105 days, while Ford inventory rose to 79 days.