America’s Car-Mart beat earnings and revenue expectations in the second quarter of fiscal 2020 as the Bentonville-based buy here, pay here used car dealer works to open three dealerships.
After the markets closed Monday (Nov. 18), Car-Mart reported net income rose 23.1% to $13.88 million, or $2 per share, in the quarter that ended Oct. 31, from $11.27 million, or $1.58 per share, in the same period last year. It beat expectations by 19 cents, based on a consensus of five analysts. Revenue increased by 13.8% to $190.31 million. It beat expectations by $20.72 million.
In the first half of fiscal 2020, earnings rose 32.7% to $29.38 million, or $4.21 per share, from $22.14 million, or $3.11 per share. Revenue rose 9.4% to $362.19 million.
“Once again, we are pleased with the quality of our work, which resulted in another solid quarter,” said Jeff Williams, president and CEO. “Our work has real purpose, and our associates are enthusiastically embracing efforts to continually improve the customer experience in the communities we serve.”
Vehicle sales rose 8.7% to 13,763 in the second quarter, from the same period last year. Average sales per store per month increased by 6.4% to 31.6. The average retail sales price increased 5.1% to $11,589. Gross profit per sale increased by 2.4% to $4,935. Same-store revenue growth increased to 12.2%, from 11%. The number of dealerships in operation rose by three to 145. The company is working to add new dealerships in Cabot, Chattanooga, Tenn., and Edmond, Okla. The company previously opened a dealership in Conway.
Net charge-offs declined to 6.1%, from 6.6%. 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. Average down payment increased to 6%, from 5.8%. Accounts more than 30 days past due increased to 3.5%, from 3.4%. Number of customers rose 6.1% to 78,910. Net finance receivables increased by 8.7% to $451.61 million.
“We are working very hard to grow our customer count at each dealership, and that success is also reflected in our lower net charge-off as a percentage of average receivables,” said Vickie Judy, chief financial officer. “These results would not have been possible without our continued investments in our associates and infrastructure. We did have some nice leveraging as our overall selling, general and administrative expenses decreased to 16.9% of sales, compared to 17.9% for the prior year quarter.”
Shares of Car-Mart (NASDAQ: CRMT) closed Monday at $90.72, up $3.06, or 3.49%. In the past 52 weeks, the stock has ranged between, $104.05 and $66.26.
USED VEHICLE TRENDS
Wholesale used vehicle prices on a mix, mileage, and seasonally adjusted basis, rose 0.29% in October, from September, according to the Manheim Used Vehicle Value Index. The index fell 0.4% to 140.3 in October, from the same month in 2018. It was the first year-over-year decline in 33 months.
Price depreciation started to accelerate in September before reaching a peak in mid-October. The value of 3-year-old vehicles fell 4% in the month, when prices typically fall between 1.5% and 2%. The higher-than-average depreciation happened in all major market segments. As a result, prices compared to the beginning of the year are lower than in either of the past two years.
“Last year, especially October, continues to be a tough comparison for prices as we reached a record in the Manheim Index because of abnormally strong consumer demand in the fall related to tariff fears and rising interest rates,” according to the index report. “A year ago, dealers were willing to spend a record amount for used vehicle inventory to take advantage of very strong new and used vehicle demand.”
Used vehicle sales rose 1.4% in October, from the same month in 2018, according to Cox Automotive. The seasonally adjusted annual rate of sales for all used vehicles rose to 39.6 million in October, from 38.1 million in the same month in 2018. The October rate is down from 39.8 million in September. The seasonally adjusted annual rate of sales for the used retail industry rose to 20.6 million in October, from 19.8 million in the same month in 2018. The October rate is up from 20 million in September.
The percentage of households reporting plans to purchase a vehicle in the next six months fell to its lowest level in four years in October, the Manheim report shows.