America's Car-Mart saw its shares wilt Tuesday, closing down nearly 16 percent after the used-car dealer reported profits for its third quarter that missed analysts' estimates.
Chief Executive Officer Hank Henderson said during a conference call Tuesday that sales were hurt by a delay in income tax refunds to its customers. Third-quarter sales are typically buoyed by car buyers who use income tax refunds for down payments or customers who use the extra cash to make additional payments.
Because of new laws, taxpayers filing with the Earned Income Tax Credit, typically claimed by low-income families or the Additional Child Tax Credit, likely won't see their refund checks before Monday, according to the IRS. Often, Car-Mart's customers do not have access to traditional vehicle financing because of poor credit or no credit history.
Henderson said the delay pushed the company's seasonally anticipated sales jump in late January back a full month.
The Bentonville-based buy-here, pay-here car company reported net income of $2.8 million, or 35 cents per share for the quarter ending Jan. 31, compared with $4 million or 47 cents per share for the year-ago period. Five analysts predicted an average profit of 64 cents per share for the quarter.
Car-Mart exceeded analysts' profit estimates for its first and second quarters. Before that, the buy-here, pay-here car company missed profit estimates five quarters in a row.
Revenue for fiscal 2017's third quarter was $139 million, up 1 percent when compared with $137 million for the same period a year ago. The company didn't meet an average estimate of four analysts who pegged revenue at $140.4 million for the period.
Car-Mart shares closed at $32.80, down $6.05, or 15.6 percent in trading Tuesday on the Nasdaq. Shares have traded as low as $19.49 and as high as $47.75 over the past year.
The earnings results were released Monday afternoon, with markets closed for Washington's Birthday holiday. The company held a conference call with analysts Tuesday morning.
Henderson also noted credit losses for the quarter were higher than expected. Net charge-offs as a percentage of average finance receivables stood at 7.8 percent, up from 6.6 percent from the same period a year ago. Charge-offs are an indication of debt that is unlikely to be collected.
Selling, general and administrative expenses were 18.7 percent of sales, down from 19.4 percent from a year ago. Gross profit margin was up slightly at 40.8 percent, with 40.3 percent for the second quarter.
The average sale price per vehicle increased $30 to $10,629 when compared with the third quarter of fiscal 2016. For the quarter, unit sales were down 1.3 percent to 10,629 vehicles. There were 25.3 vehicles sold per dealership per month during the period, up from 25 a year ago.
Company President Jeff Williams said that in addition to the four company dealerships closed in fiscal 2016, Car-Mart closed three dealerships in Kentucky, Arkansas and Georgia this quarter. The company currently has 140 dealerships in 11 states.
Henderson told analysts he was disappointed with the company's performance overall for the third quarter.
"Our intent is to get back to work and come back with better results," he said.
Business on 02/22/2017