Car-Mart beats earnings, revenue projections in second quarter

Rogers-based America’s Car-Mart posted gains in earnings and revenue in the second quarter of fiscal 2022 as vehicle prices rise amid tight supply. Car-Mart beat earnings expectations of $3.20 per share, based on a consensus of four analysts. It also beat revenue expectations of $269.76 million.

After the markets closed Wednesday (Nov. 17), the buy here, pay here used car dealer reported earnings for the period ending Oct. 31 increased by 8% to $22.88 million, or $3.33 per share, from $21.18 million, from $3.05 per share. Revenue increased by 29.1% to $288.3 million, from $223.36 million.

“We continue to see solid productivity improvement and market share gains in an operating environment with historic supply and demand imbalances,” said Jeff Williams, president and CEO. “Unit sales were up almost 6%, the average retail sales price was up 21% and interest income was up 39%, resulting in top-line growth of 29% for the quarter. We believe productivity would have been even better had availability of vehicles at lower price points been at more normal levels.”

The company’s investments in vehicle inventory have allowed it to offer better quality vehicles to customers and keep dealerships stocked amid tight supply, Williams said.

“We anticipate ongoing and continuous improvements in this crucial area of our business with the ultimate goal being to increase the amount of field time allocated to operational efficiencies, unit volume productivity and growing customer counts,” he added.

Active customers increased by 11.1% to more than 93,231 in the second quarter, from 83,945 in the same period last year. Williams noted its new service contracts, which include longer terms, oil changes and roadside assistance, “have been well received by the market. These new products were designed to keep our customers on the road while centralizing administrative activities to increase efficiencies and productivity at the dealership level.”

Average customers per dealership increased by 5% to 613 in the first six months of the fiscal year. Williams reiterated that most of its dealerships can support 1,000 customers. On Oct. 1, Car-Mart announced opening its 152nd dealership in El Reno, Okla. The company also has plans to open a new dealership in Norman, Okla., in the coming weeks.

“We will also continue to look for acquisition opportunities and believe there are several excellent operators who would like to join our Car-Mart family,” Williams said. “The cost of operating in our industry continues to increase at a very high rate, and we believe we can provide an owner an attractive exit strategy.”

Following are other highlights from the earnings report in the second quarter, compared to the same period last year.
• Average retail sales price rose 21.1% to $16,179, from $13,365
• Vehicles sold increased by 5.7% to 14,824, from 14,022
• Same-store revenue growth was 28.2%, compared to 12.8%
• Net charge-offs rose to 4.8%, from 4.7%
• Accounts over 30 days past due rose to 4%, from 2.5%
• Average term length increased to 40 months, from 35 months
• Net finance receivables increased 43.9% to $748.2 million, from $519.81 million.

Through the first two quarters of fiscal 2022, earnings increased by 17.4% to $47.84 million, or $6.90 per share, from $40.74 million, or $5.88 per share, in the same period last year. Revenue increased by 38.3% to $568.63 million, from $411.27 million.

Shares of Car-Mart (NASDAQ: CRMT) closed Wednesday at $123.37, down $3.04 or 2.4%. In the past 52 weeks, the stock has ranged between $177.45 and $99.50.

BROADER TRENDS
Used vehicle prices typically decline in the fall, but October was the first month they rose in more than 25 years, according to the J.D. Power Used Vehicle Price Index. The index rose 11.2 points in October, from September, and hit a record-high of 207.5.

“New market disruptions continue to bolster used values as both consumers and dealers alike lean on this side of the market to satisfy demand,” according to J.D. Power. “In addition to all the ongoing challenges on the new side of the market, used vehicles remain in short supply. This has driven prices even higher as volume remains down nearly 30% compared with pre-pandemic levels at auctions across the country.”

Between January and October, used prices are an average of 37% higher, compared to the same period in 2020. According to J.D. Power, there are no signs of price softening. Used prices are expected to remain strong for the next year. Prices are expected to fluctuate as the new vehicle industry, especially production and inventory, continues to work toward recovery.