Car-Mart CEO Hank Henderson to retire, fiscal first quarter earnings fall 1%

America’s Car-Mart will have a new CEO come 2018. CEO William “Hank” Henderson, who has worked for the Bentonville-based buy here, pay here company for 30 years, announced his retirement in the company’s first-quarter earnings report Thursday (Aug. 17).

On Dec. 31, Henderson will retire, and Jeff Williams, president of Car-Mart, will assume the role of CEO.

“We have a great team in place, and the time is right for me to take a step back from the day-to-day operations,” Henderson said. “Jeff has been with the company for 12 years now and has proven himself very capable of leading our efforts. I will be moving from CEO to CEO emeritus and board member, and will be serving as an adviser to Jeff and senior management.”

In the quarter that ended July 31, Car-Mart earned $6.982 million or 90 cents per share, compared to $7.099 million, or 87 cents per share, in the same period last year. Revenue was flat at $146.41 million. The company missed analysts’ expectations of 91 cents per share, based on a consensus of five analysts. Revenue also missed expectations of $149.52 million, based on a consensus of four analysts.

“There continues to be solid demand for the service we offer, and we are certainly focused on growth,” Henderson said. “We added one new dealership during the quarter, and we are working to improve our bench strength of future managers to put us in a position to add more dealerships in the future. We have many opportunities to improve results with our existing dealerships, and that, in addition to growing the bench to support new openings, remain our primary focus areas.”

Williams said he was excited about the future and happy to see top line growth for the quarter, “especially our sales volume productivity which increased to 28.2 retail units sold per store per month. Same store revenues were up a solid 2.1% as many of our older, more mature, better performing dealerships saw some nice gains for the quarter.

“We will continue to push for productivity improvements for existing dealerships as we see opportunities to take back some market share. The investments we have made, most recently with general manager recruitment, training and advancement as well as collections support, will help allow us to confidently grow and leverage our costs over time.”

From the same period last year, the company saw a $2 million increase in interest income, average retail sales price of its vehicles fell $7 to $10,386, gross profit margin fell to 41.4%, from 41.8%. Collections as a percentage of finance receivables fell to 12.4%, from 13%, and average contract term rose to 32.6 months in the quarter, from 31.7 months in the same period in 2016.

Net finance receivables rose 4% to $369.98 million, from $352.54 million in the same period last year. Net charge-offs as a percentage of finance receivables rose to 6.4%, from 6.2%. Net charge-offs relate to the losses from repossessions. When Car-Mart repossess a vehicle, it’s sold in the wholesale market, and any difference between the loan amount and the wholesale proceeds are the net charge-offs.

The company has 68,800 active auto loans, up 2,000 loans from the fourth quarter. Accounts more than 30 days past due rose to 4.6%, from 4.4%. Average percentage of finance receivables improved to 81%, from 80%. Provision for credit losses was 26.6% of sales, up from 25.7%. Selling, general and administrative expenses rose to 18.6% of sales, from 17.9%.

Shares of Car-Mart (NASDAQ: CRMT) closed at $37.55, down 65 cents or 1.73% on Thursday. In the past 52 weeks, the stock has traded between $38.45 and $36.60.

INDUSTRY TRENDS
Wholesale prices for used vehicles up to eight years old fell 2% in July, according to J.D. Power Valuation Services.

“Historically over the past five years, losses for the period averaged a nearly identical 2.1%.”

The decline pushed down the J.D. Power Valuation Services’ Seasonally Adjusted Used Vehicle Price Index to 110.4, a 0.7% decrease.

“The consistent chipping away of prices month-over-month has the index down 7.1% through July compared to the same period in 2016,” according to J.D. Power Valuation Services. “Looking back at July 2016, the index sat 8.7-points higher at 119.1.”

Late-model vehicle auction volumes fell 16.4% to 208,736 in July, from 249,831 in June.

“While large, volume declines of this magnitude are common for this time of the year,” according to J.D. Power Valuation Services.

Through the first seven months of 2017, volumes have risen 7.2% to 1.68 million from 1.57 million over the same period in 2016. In August, wholesale prices of vehicles up to eight years old are expected to fall 2.6%, which was the same decline in the same month in 2016. For 2017, the prices should fall 6.5%, and in 2018, the prices are projected to fall about 3%.