Car-Mart's Profit Drops Sharply in Fiscal Q2

Car-Mart's Profit Drops Sharply in Fiscal Q2
Jeff Williams, CEO of America's Car-Mart (Bob Coleman)

America’s Car-Mart Inc. (Nasdaq: CRMT) of Rogers reported a steep drop in profits in the second quarter of fiscal 2023 late Wednesday night.

The company reported income of $3.1 million, a decrease of nearly 87% from $23.4 million in the same quarter a year ago. The income came on revenue of $351.8 million, up 23.7% from $284.5 million a year ago.

Earnings per share was 48 cents, down from $3.41 a year ago.

It's the company's second straight quarter with a major decrease in profits. Net income was down 47% in Car-Mart's fiscal first quarter.

Shares of the company were down more than 12% Thursday morning. For the year to date, shares have fallen 45%.

America’s Car-Mart CEO Jeff Williams said the company faced ongoing challenges brought about by increased costs of vehicles, higher labor costs and inflation.

“Looking at our business at a high level, our sales increased nicely this quarter as compared to the prior year’s quarter, but we earned far less income,” Williams said. “The market changed dramatically during the past year, as the price of used vehicles increased while our customers’ ability to pay has declined.

"The result is we have taken losses on certain amounts of inventory, and we expect wholesale losses to continue into next quarter. In addition, labor costs are up across the board, as well as funding costs of the business due to higher interest rates. We view the wholesale losses and procurement challenges as temporary.”

The company reported selling 15,885 vehicles during the quarter, up from 14,824 a year ago. The average sales price of each vehicle was $18,025, up from $15,926 in the same quarter of 2022.

Same-store revenue growth was 23.2%, down from 28.2%; the company reported 154 stores in operation, an increase of two. Williams said America’s Car-Mart had more than 98,600 active customers.

“We are the market leader in a vital, irreplaceable, and growing industry,” Williams said. “Numerous competitors are shrinking and closing while we are leaning into our value proposition, adapting, as always, to changing business conditions. The combination of rapid inflation, tight supply conditions for our vehicle, and rising credit costs is unprecedented; this environment creates enormous opportunity for America’s Car-Mart. Our volumes grew in the last quarter despite these headwinds.

“There will always be a large number of people living paycheck to paycheck, and no firm is better positioned to serve this customer than America’s Car-Mart.”

Williams said the company’s profits were affected by several investments that have been made that will pay off down the road. Those include a new system of acquiring vehicles, renovating or relocating store locations and upgrades in the company’s loan origination system and software programs.

“We understand the short-term challenges in the business, but we see them as just that — short term,” Williams said. “The opportunity before us has never been clearer, and we are fortunate to be in a growth mindset while the industry as a whole retreats.”

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