America’s Car-Mart is ready to grow, and Jeff Williams, president and chief financial officer, will be leading the way when he becomes CEO in January.
“We have built this big machine to grow,” Williams said.
But competition, 0% interest rates and less-than-expected earnings have slowed the company’s growth plans. Over the past year, the Bentonville-based buy here, pay here used car dealer closed eight dealerships. Historically, the company has opened 10-12 dealerships annually.
However, Williams expects the pattern to change and the company to start growing again.
“The short-term plan is to really grow by leveraging our top performing managers.”
Seasoned general managers have started to operate multiple dealerships and function like franchisees while Car-Mart trains general managers. The first two dealerships managers have had the opportunity to manage this way are in Siloam Springs. The others are dealerships in Centerton and Rogers. In the past, some general managers had operated dealerships along with smaller satellite dealerships, which had been established as payment centers for customers, but until recently, they haven’t operated more than one full dealership. The satellite locations have since closed as online payments have become more widely used. Customers also can make payments at Wal-Mart.
In early 2017, the company established a vice president position focused on recruiting and training general managers. General managers need a higher skill set and have less room for error as the business has shifted to a higher volume, lower margin business model.
“It’s up to us to attract a really skilled person,” Williams said.
The managers must have the freedom to operate the business based on the unique competitive environments of each location. The strength of the company is to be decentralized but have centralized controls.
“We’ve got a lot of new general managers.”
On Aug. 17, CEO Hank Henderson announced he would retire Dec. 31 and appointed Williams his successor. Williams has been president of the company since March 2016, and the operational role has helped him prepare for the CEO position. He gives credit to Henderson for a lot of the preparation. Henderson has worked more than 30 years for Car-Mart, including as district manager, general manager, chief operating officer and president. He will become CEO emeritus and remain on the board of directors, advising Williams and senior management.
With each decision, Henderson has considered the impact on customers, Williams added. Car-Mart is a unique people business in that customers have a lot of face-to-face interaction with employees, Williams said. They work with customers to put people in transactions that make sense to them. Unlike other car dealerships, Car-Mart carries loans on its books.
“We’re in the boat the whole way.”
Williams was hired as chief financial officer in October 2005. He joined when Eddie Hight was chief operating officer. Williams said he and Hight grew up together in Springdale. On Nov. 21, Hight resigned from the board of directors, according to a filing with the U.S. Securities and Exchange Commission. He served as chief operating officer for more than 11 years until he retired in November 2013 and had been on the board since October 2013. According to the filing, board members approved a $430,000 annual salary for Williams, starting Jan. 1 when he becomes CEO.
When Williams moves into the position, Vickie Judy, principal accounting officer, will become chief financial officer.
“I’m ready to move on,” said Williams, adding that he has a “very good replacement. Vickie is outstanding. We won’t miss a step at all.”
Williams has worked close with Judy to prepare her for the role and will continue to be involved after the move to CEO. As a chief financial officer, Williams maintained his CPA license, but after he becomes CEO, he will allow it to go to inactive status. Williams worked seven years for accounting firms in Dallas and Tulsa before he joined Car-Mart.
He graduated from Springdale High School in 1981. In 1985, he graduated from the University of Arkansas with a bachelor’s degree in accounting and accepted a position at Arthur Andersen in Tulsa. He later worked for Coopers & Lybrand in Dallas. He also has experience working as a chief financial officer and vice president of operations for private companies. Williams and his wife, Christine, have five children and reside in Springdale. He enjoys going to the lake and playing golf.
On Nov. 20, the company opened its 141st dealership in Centerton, and shares of Car-Mart (NASDAQ: CRMT) soared to a 52-week high of $49.40. The price has since fallen and closed at $44.65 on Dec. 29. In the past 52 weeks, the stock has traded between $49.40 and $30.20. Equity analysts for Jefferies reiterated a hold rating for the company, and increased the share price target to $45, according to a note. Analysts were encouraged by the positive credit trends but remained on the sidelines because of value and competitive factors.
On Nov. 16, Car-Mart reported second-quarter 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. Revenue was flat at $149.118 million. In the past two quarters, earnings have risen 6.9% to $12.961 million, or $1.69 per share, from the same period in 2016. Revenue has been flat at $295.536 million. The company has 69,900 active loans, up 1,100, from the first quarter. Accounts more than 30 days past due fell to 4.1%, from 4.8% in the same period in 2016. Net charge-offs fell to 7.5%, from 7.7%. Charge-offs relate to the losses from repossessions and are the difference between the loan amount and the money received from selling the vehicle on the wholesale market.
In November, wholesale used vehicle prices increased 7.8%, from the same month in 2016, according to the Manheim Used Vehicle Value Index. Used vehicle prices are returning to values before a volatile hurricane season, and the change is reflected in a 1.29% decrease in prices since October. Used car sales fell 4% in November, from the same month in 2016, according to Cox Automotive. For 2017, used car dealers are expected to sell 39.1 million vehicles, a 2% increase from 2016.
As it loads up its bench of general managers, Car-Mart will continue to open dealerships. Henderson previously said the company could be at 200 dealerships without stepping outside of its existing footprint.
“I’m really proud of where we are at right now,” Williams said. “Hats off to Hank and Eddie for not losing the culture with all these changes.”
One thing Williams doesn’t expect to change is Henderson’s role as the face and voice of the company’s ‘drive easy’ brand in advertising. Williams, who joked he has a face for radio, said Henderson is good at advertising and expects that to continue.