America’s Car-Mart sees 376% profit gains in fourth quarter

by Kim Souza ([email protected]) 651 views 

Rogers-based America’s Car-Mart Inc. posted stellar fourth-quarter profit Monday (May 24) with net income rising 376% to $43.5 million for the period ending April 30. Net earnings per share totaled $6.19, speeding past analysts’ expectations of $2.80 per share. Revenue for the quarter rose to $279 million, up 42% from a year ago.

The buy here, pay here used car dealer said a $15.1 million decrease helped fourth-quarter earnings in allowance for credit losses in the quarter, equating to an extra $1.35 per share in net earnings. The buy-here-pay-here used car dealer also benefited from rising used car prices and solid demand.

For the fiscal year also ended in April, Car-Mart posted total annual revenues of $918 million, compared to $744 million a year ago. Net income rose to $104 million, up from $51 million in the prior year. Diluted fiscal year earnings per share totaled $14.95, up by $94% year over year. The company sold 56,806 cars, up 7.4% from the prior year.

“We are pleased with our results and are optimistic about our ability to continue to grow the company as we move forward. We have a unique position in the market and believe that we have an obligation to serve significantly more customers – we improve lives by reducing stress related to our customers’ local transportation needs. We give our customers peace of mind by keeping them on the road and supporting them at the very highest levels. We are clearly seeing the benefits and the power and potential of the various investments we have been making to the model,” CEO Jeff Williams said in Monday’s earnings release. “It has been a very difficult year with the pandemic and social unrest in our country, but our team has stayed focused on taking care of each other and our customers and we have become stronger as a result of these challenges.”

Williams said the investments Car-Mart is making are foundational and should continue to allow the business to increase productivity and leverage its costs while also significantly improving the customer experience. The investments include training for sales teams, inventory procurement and management.

“Investments in information technology via our Microsoft Dynamics 365 effort are critically important and key to our future,” Williams said. “We are also excited about our customer-facing digital opportunities and the advantages these efforts will give us in our local markets. We will continue to look for opportunities to move certain functions from the field to the corporate office to allow our field personnel to focus on growing market share and serving more customers. We are making good progress in all of these areas, and we have a collective sense of urgency to move forward quickly.”

Car-Mart saw a record sales volume of 36.5 cars sold per lot for each month in the fourth quarter. The average retail sales price increased 15.9% in the period, and the company sold 24.3% more cars than a year ago.

“Net charge-offs for the quarter, as a percentage of average finance receivables, were down to 4.8% compared to 5.6% in the prior-year quarter. As a result of the improved credit losses as well as our outlook for projected losses, we lowered our allowance for credit losses from 26.5% to 24.5% as a percentage of finance receivables, net of deferred revenue resulting in the $15.1 million pretax decrease in provision for credit losses,” said Vickie Judy, chief financial officer at Car-Mart.

She said expenses rose $5.7 million in the quarter with continued investment in people and infrastructure to support a growing customer base. The reduction in credit loss provisions directly benefits the company’s bottom line profits. Williams said the business is transitioning from a collections company to a sales company that is good at collections.

Companywide Car-Mart has more than 2,000 workers supporting over 88,000 customers. With each dealership having the ability to support 1,000 or more customers, there is substantial room for future growth.

Car-Mart’s debt, net of cash, to receivables was 27.5% in the recent quarter compared to 25.1% a year ago. During the fiscal year ending April 30, Car-Mart added $188.4 million in receivables, and it increased inventory by $45.8 million. Judy said the company also funded $9 million in capital expenditures and repurchased $10.6 million in common stock while increasing debt by $67 million, net of cash, creating a solid balance sheet and robust cash-on-cash returns.

Investors and shareholders had plenty to celebrate with the blockbuster earnings. Shares of America’s Car-Mart (NASDAQ: CRMT) closed $2.88 higher at $149.63 per share on Monday. Shares continued to rally $4 higher in after-market training to $154. Over the past 52 weeks, Car-Mart shares are up 36%. The high during the past year was $165, and the low was $77.05