Car-Mart beats earnings expectations, misses revenue estimates in fiscal 2019

by Jeff Della Rosa ([email protected]) 376 views 

America’s Car-Mart beat earnings estimates but missed revenue expectations in fiscal 2019 as profit rose 30.5%, and revenue increased 9.3%. Also, the Bentonville-based buy here, pay here used car dealer plans to open two dealerships in central Arkansas soon.

After the markets closed Tuesday (May 21), Car-Mart reported earnings for the fiscal year that ended April 30 were $47.59 million, or $6.73 per share, up from $36.47 million, or $4.90 per share. Revenue was $669.12 million, up from $612.2 million.

In the fourth quarter, profit rose 43% to $14.56 million, or $2.07 per share, from $10.16 million, or $1.43 per share. Revenue increased by 4.4% to $176.88 million.

Car-Mart beat earnings estimates by 25 cents for the year and the fourth quarter, based on a consensus of five analysts. The company missed revenue expectations by $7.69 million for the fiscal year and $10.16 million for the fourth quarter.

Vehicle sales rose 4.1% to 50,257 in fiscal 2019, and its dealerships sold an average of 29.5 vehicles per month, up from 28.7 for fiscal 2018.

In the fourth quarter, gross profit margin was flat at 40.7%, from the same period in 2018. Net finance receivables increased by 8.3% to $415.49 million. Active loans increased by about 4,500 to 75,600 loans. Average contract length declined to 32.1 months, from 32.5 months.

Accounts over 30 days past due fell 60 basis points to 2.9%. Net charge-offs as a percentage of average finance receivables fell 110 basis points to 6.4%. After the company repossesses a vehicle, it is sold on the wholesale market, and the difference between the loan amount and the wholesale price represents the net charge-off.

The company had 144 dealerships open at the end of the fourth quarter and plans to open dealerships in Conway and Bryant within the next few weeks, president and CEO Jeff Williams said. The company was working to open a location in Chattanooga, Tenn., but challenges have led to uncertainty on when or if the company will be able to open it. The company plans to open a few new locations in fiscal 2020, he said.

“We are proud of the progress being made, and we will push hard every day to continuously raise the bar on our own expectations,” Williams said. “The enthusiasm around our purpose has never been stronger as we have an obligation to serve more customers by growing at a solid, healthy pace.”

Same-store revenue rose 2.9% in the fourth quarter and increased more than 8% for the year, said Vickie Judy, chief financial officer.

“Selling, general and administrative expenses for the fourth quarter included approximately $823,000 of additional stock compensation for performance-based stock options that are expected to vest as a result of the improved net income performance,” Judy said. “We will continue to invest in the key areas of the business, especially on the people side, and at the same time expect some leveraging over the long term.”

Company leaders recently developed a new vision statement to capture the company’s “why” or purpose: “To be America’s best auto sales and finance company in the eyes of our associates and customers while improving the communities we serve.”

Shares of Car-Mart (NASDAQ: CRMT) closed Tuesday at $101.89, up $1.89, or 1.89%. In the past 52 weeks, the stock has ranged between $104.05 and $55.73.

The used vehicle market was strong in April, and the J.D. Power Valuation Services’ Seasonally Adjusted Used Vehicle Price Index rose 2.5 points to 119.9 in April, from March. The rise was stronger than usual seasonal trends and was the second consecutive month of used price increases. Between January and April, used vehicle prices have risen 1.7%, from the same period in 2018.

Prices of used vehicles up to eight years old rose 1.4% in April, and it was the best April performance on record, according to J.D. Power. The increase was better than the previous five-year average, an 0.8% decline.

Auction volume for vehicles up to five years old fell 5.3% in April, from March, but the volume rose 8.1%, from April 2018, according to J.D. Power. Between January and April, auction volume has risen 6.5%, from the same period in 2018. The supply of used vehicles up to five years old is expected to rise by about 3% in 2019 and reach a peak this year before leveling off in 2020 and 2021.

Used car prices for vehicles up to eight years old are expected to fall by 0.1% in 2019, from 2018. “As new vehicle prices rise, and affordability concerns increase, consumers will continue turning to used vehicles as alternatives to their new counterparts,” according to J.D. Power. “Even with increasing levels of used supply, healthy consumer appetite for used vehicles will help bolster sales.”