Shares of America's Car-Mart Inc. breached a year-high Thursday, after the used car retailer reported fiscal fourth-quarter earnings that widely beat Wall Street's expectations, in sharp contrast to rivals in the automotive retail industry.
The company's profit of $6 million, or 51 cents per share, was triple last year's $2.1 million, or 17 cents per share. The latest period includes a charge of a penny per share related to the closure of three Texas dealerships.
Revenue rose 29 percent to $76.5 million from $59.3 million.
The results easily beat expectations of analysts surveyed by Thomson Financial, who had forecast profit of 29 cents per share on revenue of $69.2 million. Shares traded up $2.31, or 16 percent, to $17.01 in midday trading, after hitting a new 52-week high of $17.41.
The company attributed the strong quarter to a better selection of vehicles and more extensive advertising. In addition, an uptick in the quality of car sales drove bad debt levels down to 5.9 percent from 8.5 percent a year earlier. Accounts over 30 days past due also decreased to 3.1 percent from 3.4 percent.
The results were in sharp contrast to those of rival used car retailer CarMax Inc., which saw shares plummet last week after it reported a 55 percent plunge in first-quarter profit and suspended its previous full-year guidance.
The Richmond, Va.-based company said wholesale industry prices for sport utility vehicles and trucks fell nearly 25 percent during the quarter _ the most rapid decline of any vehicle segment that the company has experienced in its 15-year history.
And Fort Lauderdale, Fla.-based AutoNation Inc., the nation's largest auto retailer, in April reported that decelerating vehicle sales in California, Florida and other key states hurt by sagging home prices dragged its first-quarter earnings down 37 percent, missing Wall Street expectations.
But America's Car-Mart has so far avoided the economic pitfalls.
"Although we are not immune to the current difficult macro environment, we are not as directly affected as most retailers and credit providers in that we sell basic transportation and extend credit in markets where there is no real public transportation alternative," said William H. Henderson, Car-Mart president and chief executive, in a statement.
"Our collection efforts, aided by enhanced tracking software and more highly trained staff, have played a large part in the reduction of our delinquencies and credit losses throughout this year," he added.
Car-Mart said in a conference call with analysts that it was able to avoid CarMax's SUV price squeeze since its inventory time on trucks and sports utility vehicles is just 30 days _ not long enough to see major price depreciation. Henderson added that as the prices of trucks and SUVs have dropped, Car-Mart has been able to get better-quality inventory of those models, and their sales remain strong.
While maintaining that America's Car-Mart will still focus on basic transportation, he noted that with a large portion of retail outlets located in the rural South, a "significant portion" of the company's customer base prefers trucks and SUVs.
"We are working hard to ensure that the customers we put into these vehicles can not only afford the payment, but also the gas costs as well," Henderson said on the call.
Henderson said profit margins were helped by the company sourcing more of its inventory locally, and the company's new credit scoring system boosted the quality of the deals transacted. Furthermore, Henderson said Car-Mart was out in front of competitors with a promotion linked to customers' tax stimulus checks, which helped April and May sales.
Looking ahead, Car-Mart admitted it is benefitting from higher-income customers feeling the economic squeeze and forgoing new car purchases in favor of a used automobile. But, the "unbanked and credit-impaired customer is a huge customer base, and still needs these cars in the markets we are in," Chairman T.J. Falgout told analysts.
For the full fiscal year, the company earned $15 million, or $1.26 per share, compared with $4.2 million, or 35 cents per share, in fiscal 2007. Revenue rose to $274.6 million from $240.3 million.
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