Car-Mart 1Q profit falls nearly 50%, revenue up over 20%

Rogers-based America’s Car-Mart Inc. posted an earnings decline and a double-digit revenue increase in the first quarter of fiscal 2023 amid high prices and a tight supply of vehicles.

After the markets closed Wednesday (Aug. 17), the buy here, pay here used car dealer reported earnings for the period ending July 31 declined by 47% to $13.23 million, or $2 per share, from $24.95 million, or $3.57 per share. Revenue rose by 23% to $344.88 million, from $280.32 million.

Car-Mart missed earnings expectations of $3.14 per share based on a consensus of four analysts. The company beat revenue expectations of $322.4 million.

Same-store revenue growth declined to 21.5%, from 46.7%, while average sales per store were flat at about 34 vehicles a month. The company had 154 stores as of July 31, up three from the same time last year.

Vehicle sales rose by 2.1% to 15,536, from 15,219. The average vehicle sales price rose by 19.8% to $18,455, from $15,405. Customers increased by 6.3% to 96,899, from 91,158.

Net charge-offs rose to 5.6%, from 4.3%. Accounts over 30 days past due rose to 3.6%, from 3.3%. Net finance receivables increased to $919.45 million, from $688.59 million.

“Even with significant industry headwinds, namely higher vehicle prices resulting from supply/demand imbalances, especially at lower price points, we saw unit volumes increase,” said CEO Jeff Williams. “We believe that when supply in our market eventually returns to more normal levels, our productivity will increase as affordability is most certainly keeping many good customers out of the market.”

Williams said revenue for the quarter was the second-highest in history, with the highest in the previous period.

“We are seeing car prices level off, and we expect a gradual flattening as we move forward – better news for consumers,” he added. “Our customers are benefiting from a robust job market,” but inflation has been a challenge. More than half of the company’s sales can be attributed to repeat customers.

“In our shift from a collections company to a sales company good at collections, we are centralizing certain functions of the business, while remaining mindful of the power of the decentralized model,” Williams said. “Our model allows general managers to be entrepreneurial, making decisions face-to-face with customers while physically looking at collateral.”

The company expects to continue to acquire dealerships to increase its footprint. It also looks to be able to serve at least 1,000 customers per store and sell between 40 and 50 vehicles per store each month. Williams said the company has 12 dealerships serving at least 1,000 customers.

“We have several capital projects in process which are needed so that our physical facilities can support growth,” Williams said. “By increasing the ‘funnel’ of potential customers via our new Loan Origination System, we can continue to accelerate our 41-year history of serving more customers at a higher level.”

Vickie Judy, chief financial officer, said inflation will continue to put pressure on gross margin percentage, but this is starting to flatten as the company seeks to improve efficiencies. She also expects continued wage pressures and strong demand for talent.

“Our inventory investment at the end of July was higher than normal as we work through reconditioning, parts and shop delays while continuing to provide the dealerships with the proper mix and quantity of retail-ready units,” Judy said. “We will continue to look for efficiencies in our inventory processes and improving inventory turns as we move forward.”

Shares of Car-Mart (NASDAQ: CRMT) closed Wednesday at $119.47, down $5.85 or 4.67%. In the past 52 weeks, the stock has ranged from $72.50 and $151.98.