Hank Henderson
(This article has been corrected. See end for details.)
America’s Car-Mart Inc. of Bentonville reported a significant drop in income for the first quarter of 2016 that CEO Hank Henderson said was mostly the result of the company’s “lack of consistent blocking and tackling.”
Car-Mart’s revenue for the quarter was $143 million, an improvement of approximately 12 percent from the same quarter of fiscal 2015. Income, however, dropped from $7.2 million to $4.6 million and diluted earnings per share was 52 cents, compared to 79 cents in the same quarter a year ago.
The earnings per share was almost 40 percent off analysts’ consensus estimate of 86 cents. Car-Mart reported an increase in net charge-off — writing off a debt it believes it won’t collect — from 6.3 percent to 7.4 percent, as measured against the company’s average financial receivables.
“The bottom line results for this quarter were obviously disappointing,” Henderson said in a conference call. “Sales were very solid and we’re pleased with that aspect. We are not pleased with our results.”
In a news release preceding the conference call, Henderson said “operational inconsistencies” with some stores caused problems with charge-offs and debt collection. Henderson pinpointed execution errors at 25-30 dealerships.
“We are focused intently on the improved performance of each of these stores by supporting these general managers with better training and retraining of themselves and their staffs where appropriate,” Henderson said.
Henderson said the company has had “distractions” from using a new system and new protocol and those distractions proved harder to deal with for some dealerships.
“The good news is we can do something about this,” Henderson said.
Henderson also said debt collection was hampered, in some instances, of poor use of the company’s GPS system. Car-Mart spent $600,000 in the first quarter installing GPS devices in sold vehicles, part of its ongoing initiative that has seen 80 percent of its cars outfitted.
Car-Mart believes that GPS can aid in location of vehicles when the buyer falls behind in payments. CFO Jeff Williams the device is only for location and does not allow the company to monitor the vehicle or interact with it.
Henderson said Car-Mart has 143 dealerships in 10 states, an increase of 50 over the past five years. Henderson said Car-Mart plans to open eight locations, including one in Iowa, which will be the company’s 11th state of operation.
“You can’t have that level of growth without a few bumps in the road,” Henderson said.
Average unit sales per store rose 1.8 percent to nearly 29 vehicles per month and the average sale price rose 5.3 percent. Car-Mart sold 12,244 vehicles in the quarter, compared to 11,482 in the same quarter of 2015.
(Correction, Aug. 22, 2015: Revenue was up in the first fiscal quarter, but net income was down. The original version of this article reversed revenue and income.)
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