Car-Mart surges on 1Q profit

Shares gain $4.35 after much-improved earnings reported

Graphs showing information about Car-Mart's Fiscal first quarter earnings
Graphs showing information about Car-Mart's Fiscal first quarter earnings

America's Car-Mart, Inc. reported net income of $7.1 million along with improved revenue, citing better inventory management and improved management at its car lots.

For the quarter ended July 31, Car-Mart reported profits of $7.1 million or 87 cents per share compared with $4.6 million or 52 cents a share for the same period last year. Analysts had predicted net income of 41 cents a share.

Revenue for the first quarter of the buy-here-pay-here used-car dealer's 2017 fiscal year stood at $146 million, up 2 percent from $143 million for the year ago period. Analysts had anticipated revenue of $137.6 million.

Car-Mart had missed analysts' profit estimates for five quarters in a row. The results were released Thursday after the market closed. The company held a conference call with analysts Friday morning.

Wall Street reacted favorably to the report, with Car-Mart shares closing at $36.68, up $4.35 in trading on the Nasdaq, a 13.5 percent surge. Shares have traded as high as $38.91 and as low as $19.49 over the past year.

Chief Executive Officer Hank Henderson called the quarter "very solid," crediting the efforts of the company's car lot employees, its general managers and area operations managers for the improvements. He said the quarter was a good start for the year, but Car-Mart would continue to work on becoming more efficient going forward.

The average sale price per vehicle was up $428 to $10,393, or a bit more than 4 percent when compared to the first quarter of fiscal 2016. Gross profit margin was also up, with the first quarter seeing 41.8 percent compared to 41.2 percent from a year ago. Active accounts were 66,900, up 1,900 from the first quarter of fiscal 2016.

Unit sales in the first quarter decreased 2.3 percent to 11,957 compared to 12,244 in the year ago quarter. Lot productivity was also down with 27.9 vehicles sold per store per month compared to 28.9 vehicles for the same period last year.

Company President Jeff Williams said the company has been buying better quality vehicles with lower maintenance costs, which helps profits. He said the company's inventory includes a good number of sport utility vehicles and pickups, the vehicles customers are demanding.

"We do think we're buying a much better car," Williams said.

Car-Mart closed four lots in fiscal 2016 while opening two. Henderson said that while expansion is important, Car-Mart doesn't have any immediate plans to open more lots this year. The company has 143 dealerships in 11 states.

Business on 08/20/2016

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