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Oct 31, 2022
Car-Mart Q2 2023 Earnings Report
America's Car-Mart reported diluted earnings per share of $0.48 on revenues of $352 million.
Key Takeaways
America's Car-Mart reported a 24% increase in revenues to $352 million, driven by a 30% increase in interest income. Diluted earnings per share were reported at $0.48. The company faced challenges including wholesale losses and higher costs, but remains optimistic about long-term growth.
Revenues increased by 24% to $352 million, with interest income up 30%.
Unit sales volume increased by 7%, and the average sales price increased by 13%.
Sales volume productivity reached 34.4 units sold per dealership per month, a 5% increase year-over-year.
Net charge-offs as a percentage of average receivables were 5.8%.
Car-Mart
Car-Mart
Forward Guidance
The company anticipates wholesale losses to continue into the next quarter but views them as temporary. They are adjusting retail prices and believe that as vehicle prices moderate, they can gain market share. The company expects to increase consumer interest rates to 18% in most states.
Positive Outlook
- The company believes the current environment will drive more higher credit quality customers to the Car-Mart family in the future.
- The company sees opportunities to strengthen deal structures without significantly affecting volumes.
- The company remains confident in both its long-term growth prospects and its ability to earn ROEs in line with its historical averages.
- The company is focused on its long-term goals of serving more customers and improving productivity at its dealerships.
- The company believes that customers rely on the services they provide, and they have a large opportunity to help them in times such as these.
Challenges Ahead
- The company anticipates wholesale losses to continue into the next quarter.
- The company's customer is stressed by high prices for necessities like gas, food, and rent, while the price of their vehicle remains relatively high.
- Overall industry credit results are normalizing as 60+ delinquencies in subprime auto are now well above pre-pandemic levels.
- The company's interest expense increased $5.8 million over the prior year quarter due to higher average borrowings and higher interest rates.
- The company faces challenges including wholesale losses- approximately 200 basis points of gross margin decrease, and inventory procurement challenges, including higher direct and indirect cost of sales inputs, that were not passed on to consumers- another approximate 200 basis point effect.