Car-Mart Stays the Course in Low-Interest Environment

by Marty Cook  on Monday, Sep. 1, 2014 12:00 am  

CEO Hank Henderson says there are some deals America’s Car-Mart can’t match. | (Photo by Beth Hall)

Hank Henderson, CEO of America’s Car-Mart Inc. of Bentonville, used the annual shareholders’ meeting on July 30 to tout the used car dealer’s navigation of a difficult competitive environment.

Car-Mart saw its income drop 34 percent in fiscal 2014, thanks in large part to competition from third-party financing — which Henderson likened to a playmate making mischief in one’s own backyard. Still, Car-Mart posted net income of $21.1 million for the fiscal year that ended April 30.

“It was still a pretty stout year,” Henderson said. “When you look back over the past year, one of the things you really have to look at, a lot of the pressures our customers had — along with crazy availability of financing — it’s about as tough as our business can ever get. At the same time, while it wasn’t growth rates as high as we have seen, we still grew the business.”

Revenue in fiscal 2014 reached $489.2 million, up 5 percent from fiscal 2013.

Car-Mart does its own financing for the used cars it sells and resisted the lure of changing its finance terms in the easy-money climate. While others offered five- and six-year terms, Car-Mart stuck with its tried-and-true business model, which includes an average term length on loans of approximately 28 months.

“We talk a lot around here about, ‘Are we doing the right things today to get us where we want to be five years from now?’” Henderson said. “We certainly don’t run our business quarter-to-quarter, but obviously we like to see good quarterly results.”

Henderson said Car-Mart’s stay-the-course strategy was affirmed when it reported first-quarter earnings on Aug. 20: net income of $7.3 million, down 3 percent from a year earlier, on a 3 percent increase in revenue, to $127 million.

Those weren’t the only important metrics, Henderson said, as the company bought back nearly 75,000 outstanding shares and paid down its debt by approximately $3 million in the quarter.

“We’ve grown fast and, like any company that is growing fast, you have to figure out how do we handle things at this level and at this level,” he said. “For us, because we are in a business where we’re financing things, the results sometime take a little longer to show up. I do know the results we saw in the first quarter, a big part of it had to do with the fact we’re doing better as a company.”

‘I Can’t Do That’

During the first-quarter conference call, Henderson and Chief Financial Officer Jeff Williams didn’t share nearly as many thoughts on their competition as they have done in previous quarters. That was by design, Henderson said.

“We’ve talked enough about it; these are the things we can control and these are the things we can affect,” Henderson said. “We would rather keep our company solid and have a slightly less growth rate during this time. We still have great returns. We haven’t seen the growth we would have liked to have if we were a little more aggressive.

 

 

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