America’s Car-Mart closed eight dealerships in the past year, and the closings impacted second-quarter revenue as vehicle prices flattened and it worked to train general managers.
On Nov. 16, the Bentonville-based buy here, pay here used car dealer reported earnings rose 19% to $5.969 million, or 79 cents per share, in the quarter that ended Oct. 31, from the same period in 2016, and revenue was flat at $149.118 million.
When asked about the company’s plans to open dealerships, President Jeff Williams said the talent at the general manager position is preventing the company from adding “a whole bunch of dealerships.” Years ago, it was adding “10 to 12 dealerships a year, and with the change in the industry, [the company] decided that we needed to pull back and take another look at the growth plans. And that’s kind of where we are at now. We’ve got a good group of general managers.” Some still need “seasoning, and we’re working hard to bring them up and train them up.”
Car-Mart opened its 141st dealership in Centerton on Nov. 20, and as the company loads up its bench of general managers, it won’t be “shy at all about opening dealerships,” Williams said.
CEO Hank Henderson said the company could be at 200 dealerships “without really stepping outside of our footprint. It’s all a people thing for us.”
But Car-Mart won’t open dealerships “without really quality folks with their name on that front door, and that’s what we’re working so hard at right now. And we’re making some good progress,” Williams said.
When asked about wage inflation, Williams said “there’s general wage pressure kind of all over the place.” However, the disruption in the brick-and-mortar retailer sector has given “us a little advantage on the wage side, but generally I think about two-thirds of our cost is wage-related. We’re a people business. So, we are very aware of wages and wage pressures,” but the same time, this might not mean the company’s customers are earning higher wages. The company is focused on “higher productivity levels” to offset wage increases.
In the past year, Henderson said its vehicle prices have remained flat, while the average vehicle model improved. “We’re able to provide a little bit better car for the same dollar.” The average selling price was $10,418 in the second quarter, and Williams hopes to see the price remain flat or narrowly increase and “put our customer in a much better car for the same money.”
On Nov. 20, shares of Car-Mart (NASDAQ: CRMT) reached a 52-week high of $49.40. Shares have since fallen about $2, and in the past 52 weeks, the stock has ranged between $49.40 and $30.20.
In October, wholesale prices for used vehicles up to eight years old declined 2.2% as the used car market remained strong because of “lingering effects from hurricanes Harvey and Irma,” according to J.D. Power Valuation Services. The five-year average for the month was a 3.2% price decline. In October, J.D. Power Valuation Services’ Seasonally Adjusted Used Vehicle Price Index rose for the third consecutive month to 114.5. Through the first 10 months of the year, the index has fallen 6.2%, from the same period in 2016.
Williams said the hurricanes might have had “some minor effect on supply and prices for a few weeks, but really did not have much of an impact on us. Our guys did a good job of staying out of the market temporarily and not overpaying for cars.”
Auction volumes for used cars declined 4.4% in October, from the same month in 2016, according to J.D. Power Valuation Services. From September, volumes fell 2.1% in October. Through the first 10 months of the year, volumes have risen 4.2%, from the same period in 2016.
In November, wholesale prices of used vehicles up to eight years old are expected to fall 2.4%, down from the 3.1% drop in November 2016. For 2017, the prices are projected to decline 5.4%, up from the 4.1% decrease in 2016. In 2018, prices decreases are expected to be less than 3%.
In October, new vehicle sales fell 1.4% to 1.35 million vehicles, from the same month in 2016, according to J.D. Power Valuation Services. For the first 10 months of the year, the number of vehicles sold has fallen 1.8% to 14.1 million vehicles, but the seasonally adjusted sales rate rose to 17.98 million cars, from 17.80 million in the same period in 2016.
For the 31st consecutive month, automakers increased incentive spending, and it rose 5.4% to $3,724 per vehicle in October, from the same month in 2016, according to Autodata. Vehicle inventory declined by two days to 71 days in October, from the same month in 2016, according to Wards Auto. From September, vehicle supply increased by seven days.