Car-Mart's quarterly profit $3.4M

Stock drops on news of lower-than-expected earnings

Graphs showing America’s Car-Mart Inc. fourth quarter information.
Graphs showing America’s Car-Mart Inc. fourth quarter information.

America's Car-Mart Inc. failed to hit earnings estimates by 18 cents per share for its fiscal fourth quarter, the company reported Tuesday, marking the fifth earnings estimate miss in a row for the Bentonville-based used-car dealer.

Car-Mart, with its primary customers having poor credit scores, reported profits of $3.4 million, or 40 cents per share, for the quarter ended April 30, compared with $7.3 million, or 81 cents a share, for the same period last year. An average of analyst estimates predicted profits of 58 cents per share.

The buy-here-pay-here car dealer posted revenue of of $155 million, up 12 percent from $138 million for the fourth quarter of fiscal 2015, beating the average of analyst estimates, $149 million.

Car-Mart released its results after market close Monday. It held a conference call with analysts Tuesday morning.

Shares of Car-Mart slumped on the news. At the end of trading Tuesday, shares stood at $21.65, down $1.53, or nearly 7 percent, on the Nasdaq. Shares hit a yearly low of $19.49 before rebounding. Car-Mart shares traded as high as $56.56 in June 2015.

For the year, Car-Mart booked net income of $11.6 million, or $1.33 per share, compared with $29.5 million, or $3.25 a share, in fiscal 2015. Revenue was $568 million compared with $530 million for the year earlier. Revenue at stores open at least a year increased 2.7 percent.

During the conference call, Chief Executive Officer Hank Henderson said competition remained intense in the segment, with other dealers luring customers with somewhat newer cars but at longer term loans and at interest rates that tended to be above 20 percent. Car-Mart executives have contended for quite some time that this business model isn't sustainable long-term.

Henderson said Car-Mart is committed to working with shorter term loans, typically around three years, so customers have a vehicle that still has a useful life when the loan is paid in full. He added other drags on profits included having to pay more for newer and better quality vehicles, particularly trucks and SUVs, to keep the quality of the company's inventory high, and failure to keep a lid on repair costs.

On the upside, Car-Mart reported increased sales at its older, more established dealerships, something the company has been working on for several quarters. The retail cost per car sold was also up $634, or 6 percent, from the same quarter a year ago.

In the fourth quarter, Car-Mart sold 12,345 vehicles, an increase of 5.5 percent from 11,699 from the same quarter last year. On average there were 28.2 vehicles sold per store, per month during the fourth quarter, up from 28.1 vehicles per store for the same period a year ago.

Car-Mart said it will increase its contract interest rate from 15 percent to 16.5 percent but noted this rate is still below the market average, which is closer to 20 percent. Henderson said he wasn't concerned the increase would impact sales going forward.

Over the fiscal year, the company opened six new stores, but it closed four over the same period, including dealerships in Tyler and Atlanta, Texas; Cushing, Okla.; and Trumann three of which were satellite locations of larger lots. The company plans to keep expansion down until it sees increased profits, Henderson said. Car-Mart currently has 143 dealerships in 11 states.

"We will get back to work and hopefully we're going to see better results next time we talk," Henderson said at the end of the conference call.

Business on 05/25/2016

Upcoming Events