Bentonville-based America's Car-Mart beat profit estimates for its third quarter because of a windfall from federal tax cuts and also saw its revenue up from the same period last year but shy of analysts' expectations.
Jeff Williams, the used car dealer's new president and chief executive officer, said he was pleased with the results, noting efforts to recruit and support the company's general managers, along with improved inventory management, were key factors in Car-Mart's success during the quarter.
The company released its earnings report Monday after market close and hosted a conference call Tuesday morning. Car-Mart shares rose $1.75, or almost 4 percent, to close Tuesday at $48. Shares have traded as low as $30.20 and as high as $49.40 over the past year.
The buy-here, pay-here car dealer reported a profit of $13.4 million, or $1.82 per share, for its third quarter of fiscal 2018, which ended on Jan. 31, compared with $2.8 million, or 35 cents a share, for the year-ago period.
Without the impact of the Tax Cut and Jobs Act of 2017 and the one-time charge for a retirement bonus paid to former CEO Hank Henderson, earnings per share would have been 60 cents, according to the company. The average estimates of five analysts predicted earnings of 93 cents per share for the quarter.
When he retired, Henderson was awarded a $1.1 million, lump-sum special retirement bonus, according to documents filed with the Securities and Exchange Commission. The bonus was for Henderson's "significant contributions and long-standing service to the Company," according to the filing.
In mid-August, Henderson said he would step down at the end of the year. He was with the company for 30 years and headed it for the past decade. He was replaced by Williams, a longtime company executive and former CFO.
Revenue was $147.2 million for the third quarter, compared with $138.8 million a year ago. An average revenue estimate of four analysts called for revenue of $152.8 million.
Car-Mart's customers often do not have access to traditional vehicle financing because of poor credit or no credit history. In recent years, Car-Mart has seen increased competition for its customer base from traditional car dealers who are offering newer vehicles with extended loan terms to those with poor credit.
Vickie Judy, Car-Mart's new chief financial officer, said the company is benefiting from selling higher quality vehicles to customers with less credit risk.
The company saw a decrease in income tax provisions of $9.7 million at a 33 percent "blended base rate" for fiscal 2018 because of the new federal tax cut. Judy said Car-Mart expected to see a 24 percent tax rate going forward for fiscal 2019, down from 37 percent in past years.
America's Car-Mart runs 140 dealerships in Alabama, Arkansas, Georgia, Indiana, Iowa, Kentucky, Mississippi, Missouri, Oklahoma, Tennessee and Texas. During the quarter, it opened lots in Centerton and Bowling Green, Ky.
In the company's 2018 fiscal third quarter, it saw an increase in sales volume, with 27.2 vehicles sold per store per month compared with 25.3 for the same quarter a year ago. The sale price per vehicle for the period, $10,662, was up 0.3 percent when compared to last year. In total for the quarter, the company sold 11,420 vehicles, up 5 percent from 10,866 for the same period a year ago.
Net charge-offs stood at 7.4 percent for the quarter, down from 7.8 percent for the same quarter a year ago. Charge-offs are an indication of debt that is unlikely to be collected.
Business on 02/21/2018