No Recession at the Scrap Yard

Last quarter, we talked about how salvage vehicle auctioneer Copart (NYSE: CPRT) is investing for the long term. The firm was punished by mercurial Mr. Market for slim margins in its new venture across the pond. Well, Rome wasn't built in a day, and neither was Copart's salvage-yard empire.

Those folks who hit the sell button back in March have to be feeling some serious seller's remorse today. The U.K. business’s gross margins in the third quarter (which ended April 30) widened to 9%. That's still a very long way from the fat profits earned here at home, but it's a step in the right direction. Domestic results were outstanding, with same-store sales up more than 9%.

Consumer-facing firms like Home Depot (NYSE: HD) and Starbucks (NYSE: SBUX) would kill for flat, let alone positive, comps right about now. Copart may just be that most elusive of business breeds -- the recession-proof powerhouse. Of course, Copart is feeling some pressure. Fuel costs are front and center, because the firm has to go out and haul salvage vehicles away from third parties. In response, the firm has announced that it's building 10 to 15 new yards.

Simply enough, strategically adding more yards reduces towing distances and, in turn, fuel cost. Plus, there's the added bonus of picking up new business. This is a heck of a lot more comfortable than the fuel-cost challenge faced by the likes of United Parcel Service (NYSE: UPS) or American Airlines parent AMR (NYSE: AMR).

Copart is rated a full five stars in Motley Fool CAPS. Join in the conversation right here.

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