Car-Mart sees 2Q profit, revenue falls; shares soar 20%

Rogers-based America’s Car-Mart Inc. posted a revenue decrease but a profit in the second quarter of fiscal 2025 as vehicle sales declined and the average sales price rose. Earnings and revenue beat estimates, and company shares jumped about 20% following the report.

Before the markets opened Thursday (Dec. 5), the buy here, pay here used car dealer reported earnings of $5.08 million, or 61 cents per share, in the quarter that ended Oct. 31 from a loss of $27.47 million, or a loss of $4.30 per share, in the same period last year. Revenue declined by 3.5% to $347.26 million from $359.78 million.

Car-Mart beat analyst expectations of a 10 cents per share loss, based on a consensus of five analysts. It also beat analyst expectations of $344.37 million in revenue.

Shares of Car-Mart (NASDAQ: CRMT) were trading at $53.75, up $8.05 or 17.61%, in heavy trading Thursday morning. In the past 52 weeks, the stock has ranged between $37.98 and $83.07.

In an earnings report, equity analysts John Hecht, Matthew Hurwit and Derek Sommers, and equity associates Alexander Villalobos and Ibrahim Kargbo, all of Jefferies, attributed the earnings beat to an accounting change in service contract revenue and higher gross margins. Margins rose to 39.4% from 34.5% in the same period last year. The company reported a $13.2 million benefit in service contract revenue, resulting from an accounting change reducing the estimated revenue recognition period.

The analysts attributed the lower vehicle sales in the second quarter in part to weather events, while the average sales price rose. Vehicle sales fell by 9.1% to 13,784 from 15,162, and the average sales price rose by 5.2% to $20,031 from $19,035.

The analysts said the company’s new loan origination system appears to be improving underwriting standards as 30-day delinquency rates improved and originating terms remained flat. Accounts over 30 days past due fell to 3.5% from 3.6%, and the average originating term was 44.2 months, flat from the same period last year.

“As we navigated industry and economic pressures, we made strategic decisions to ensure we exited stronger and better positioned to profitably grow our market share during the second half of the fiscal year,” said President and CEO Doug Campbell. “I am pleased with our progress as we continue to benefit from our enhanced underwriting or loan origination system (LOS). We improved deal structures, generated higher down payments, and benefited from higher collections and gross margins. We continue to focus on improving affordability for customers by reducing the average retail price. We’re closely managing expenses during ongoing implementation of technology upgrades to strengthen our operations. We believe Car-Mart is well positioned for future growth and profitability.”

Car-Mart closed two underperforming dealerships in the second quarter and ended the period with 154 dealerships, up one from last year. Earlier this year, the company acquired two dealerships in Texas.

The company noted that its allowance for credit losses has decreased because of the “favorable performance in loans originated under our LOS (our improved underwriting system) and the improvements it is driving in our historical loss rates.” As of Oct. 31, about half of the company’s loan portfolio was originated on the LOS.

Through the first half of fiscal 2025, Car-Mart reported net income of $4.11 million, or 55 cents per share, compared to a loss of $23.39 million, or a loss of $3.65 per share, in the same period last year. Revenue fell by 4.3% to $695.03 million from $726.57 million.

Following are other second-quarter metrics compared to the same period last year.
• Net charge-offs fell to 6.6% from 7.2%
• Customers fell 1.2% to 103,336 from 104,596
• Net finance receivables rose 2.47% to $1.13 billion from $1.1 billion