America’s Car-Mart, Inc. (CRMT) recently released its second-quarter financial results, which caused a decline in the company’s share price. The company reported sales growth of 2.8% year-on-year, reaching $361.6 million. However, this figure fell short of the analyst consensus of $363.76 million.
The revenue increase was primarily driven by a 23% rise in interest income and a 5.6% increase in average retail sales price. Approximately 40% of this growth was attributed to the vehicle selling price. Despite the overall increase in sales, same-store revenue growth was only 2.7%, significantly lower than the 22.2% reported in the same quarter last year. Additionally, retail unit sales for the quarter decreased by 4.6% compared to the prior year quarter, with 15,162 units sold.
On the positive side, the gross profit per unit improved from $6,132 to $6,835 in the second quarter of FY24. This improvement was a result of the company’s continued focus on inventory efficiencies in procurement, remarketing, and repairs. As a result, the gross margin increased from 32.1% to 34.3%.
However, America’s Car-Mart also faced challenges in the form of an increased allowance for credit loss. The company raised its allowance from 23.91% to 26.04% sequentially, resulting in a $28 million charge to the provision. This charge led to a basic earnings per share loss of $3.40 after tax.
The company reported a quarterly loss per share of $(4.30), which missed the analyst consensus of $0.79. Despite the financial challenges, America’s Car-Mart saw a 6% increase in its customer count, reaching 104,596 in the quarter under review.
In response to the financial results, Doug Campbell, the President and CEO of America’s Car-Mart, acknowledged the impact of the persistent inflationary environment on existing customers. This impact was evident in the company’s credit losses, which necessitated an increase in the allowance for credit losses. Campbell believes that these challenges related to credit loss are temporary and expects them to be resolved in the near future.
Following the release of the financial results, America’s Car-Mart’s share price declined by 17.89% to $66.37. The company will need to address its credit loss issues and work towards improving its financial performance in order to regain investor confidence and drive future growth.
In conclusion, America’s Car-Mart’s second-quarter financial results fell short of expectations, leading to a decline in the company’s share price. The company experienced modest sales growth, but faced challenges related to credit losses and lower-than-expected same-store revenue growth. Despite these setbacks, America’s Car-Mart remains committed to addressing these issues and believes that they are temporary in nature. Investors will be watching closely to see how the company responds and whether it can rebound in the coming quarters.
