Car-Mart beats earnings estimate by 27% in first quarter, profit up 42%

America’s Car-Mart Inc. beat earnings and revenue expectations in the first quarter of fiscal 2020 as it looks to open more dealerships in the year.

After the markets closed Thursday (Aug. 15), the Bentonville-based buy here, pay here used car dealer reported earnings for the quarter that ended July 31 rose 42.6% to $15.5 million, or $2.21 per share, from $10.87 million, or $1.53 per share, in the same period in 2018. Revenue increased by 4.8% to $171.88 million.

Car-Mart beat analysts’ earnings expectations by 48 cents, based on a consensus of five analysts. It beat revenue expectations by $2.57 million.

“We are pleased to report another solid quarter,” President and CEO Jeff Williams said. “We are off to a great start for the fiscal year, and we are excited about our positive momentum and the impact we are making in the lives of our customers and associates. The investments we have made and will continue to make focus primarily on recruiting, training and retention of associates with emphasis on the general manager position and are allowing us to grow the business and to significantly improve our credit results.”

Vehicle sales were flat at 12,523 vehicles sold in the first quarter, from the same period in 2018. Average sales price rose 3.6% to $11,410. Average down payment rose to 6.5%, from 6.1%. Same-store revenue growth was 3.3%, down from 12.1% in the same period in 2018. Accounts 30 days past due, rose to 3.8%, from 3.5%. Net charge-offs decreased to 5.4%, from 6.4%.

Active customer accounts increased 6% to 77,199. Net finance receivables rose 8.3% to $431.61 million, from $398.37 million in the same period in 2018. The company had 145 dealerships at the end of the quarter, up from 140 dealerships in the same period in 2018.

“We opened new dealerships in Bryant, Ark., and Conway, Ark., during the quarter,” Williams said. “We are planning to add a few more locations this year and will provide details as we move forward. We will add additional locations in the future at a rate that matches our ability to support customers and associates at the highest levels. Our primary focus in the near term is to continue to grow customer count at existing dealerships with an emphasis on our higher-performing general managers to leverage their talents while making the communities we serve better.”

Shares of Car-Mart (NASDAQ: CRMT) closed Thursday at $90.97, up $2.12, or 2.39%. In the past 52 weeks, the stock has ranged between $104.05 and $65.10.

USED VEHICLE TRENDS
In July, the Manheim Used Vehicle Value Index rose 2.6% to 140.5, from the same month in 2018. Used vehicle prices also narrowly increased from June. Vehicle values were stronger in July than normal as they usually fall by about 1% in the month. However, in July 2018, prices increased from July 2017, and the rise was driven by high consumer demand as a result of tariff fears and rising interest rates.

Used vehicle prices are expected to rise 1% in 2019, from 2018, according to J.D. Power Valuation Services. For the remainder of the year, the prices are expected to decline slightly, excluding major economic changes or a large shift in new vehicle incentive strategies.

Passenger car prices are expected to be the strongest throughout 2019. Compact and midsize car prices are projected to rise by 4.5% and 3.5%, respectively, according to J.D. Power. The price increase can be attributed to the low supply as manufacturers discontinue or cut back on new vehicle production related to these models. SUV prices are expected to rise by 0.5%, and midsize SUV prices are projected to increase by 1.5%.

“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 keep used values relatively strong.”