On Wednesday America's Car-Mart reported greatly reduced profits for its fourth quarter compared with a year ago as the used-car seller battles higher vehicle costs and its customers struggle to make ends meet.
During a conference call with analysts, Car-Mart's Chief Executive Officer Jeff Williams said the company's customers continue to be hammered by higher interest rates, fuel costs and rent expenses. He said the company's core customers faced a sudden shock in the summer of last year -- going from an environment with available stimulus money and zero inflation to one with no stimulus and high inflation -- but they are adapting.
"Our customers, you know, historically have struggled in good times and in bad," Williams said in response to questions.
He said as a result the company extended contract terms to keep payments down but that's hampered profits in the quarter. He said the company is well positioned going forward and noted two major competitors, each with more than 15 years in operation, have folded.
Memphis-based American Car Center closed the doors of its 50 locations in February and has since filed for Chapter 7 bankruptcy protection. U.S. Auto Sales, based in Georgia, abruptly closed its 39 locations indefinitely in April, according to media reports.
Shares of Car-Mart slumped nearly 20% in early trading Wednesday but recovered somewhat in afternoon trading. They closed at $82.70, down $6.61 or more than 7% in trading on the Nasdaq. Shares have traded as low as $52.24 and as high as $127.05 over the past year.
Car-Mart's customers often do not have access to traditional vehicle financing because of poor credit or no credit history. In recent quarters, the credit score quality of Car-Mart's customers has moved upward, said Doug Campbell, the company's new president -- hitting a record high in the fourth quarter.
The Rogers-based buy-here, pay-here used car dealer reported profit of $2.1 million, or 32 cents per share for its fourth quarter of 2023, compared to $26.4 million, or $3.97 per share for the same period a year ago. Revenue for the period was up nearly 11% to $388.3 million.
For the year, Car-Mart saw profit of $20.4 million or $3.11 a share in 2023 compared to $95 million or $13.92 per share for the previous year. Revenue for 2023 was $1.4 billion, up 16% compared to $1.2 billion in 2022.
A consensus of three analysts had predicted fourth-quarter profit of $1.13 per share while a consensus of four analysts put revenue at $352.9 million for the quarter, according to Yahoo Finance. Over the last four quarters, the company has failed to meet analysts' profit expectations.
For the fourth quarter the car dealer sold 17,655 vehicles compared to 16,426 a year go for a 7.5% gain. Gross profit on each vehicle was $6,354 compared to $6,545, a decrease of nearly 3%.
Vickie Judy, Car-Mart chief financial officer said net charge-offs as a percent of average finance receivables was 6.3%, up from 5.1% for the quarter a year ago but more in line with pre-pandemic losses. Charge-offs are an indication of debt that is unlikely to be collected.
She said selling, general and administrative expenses, sometimes call SG&A or operating expenses, were $45.8 million, up from $44.7 million for the prior quarter. She said those expenses would decline moving forward as the company begins to implement new technology initiatives that will reduce paperwork and improve general efficiency across the board.
Car-Mart has more than 155 locations in Alabama, Arkansas, Georgia, Illinois, Indiana, Iowa, Kentucky, Mississippi, Missouri, Oklahoma, Tennessee and Texas.