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Car-Mart enjoys numerous successes during 2021 fiscal year

With America’s Car-Mart locations turning vehicles on a monthly pace at a record level, the buy-here, pay-here dealership network closed its 2021 fiscal year with the highest amount of quarterly revenue in company history.

The successes prompted Car-Mart president and chief executive officer Jeff Williams to say, “We are transitioning from a collections company to a sales company that is very good at collections.”

Car-Mart’s retail vehicle sales for the entire fiscal year jumped 7.4% as its locations watched 56,806 units roll over the curb, up from 52,914 vehicles retailed during its 2020 fiscal year.

Williams indicated that during the company’s fourth quarter, Car-Mart’s 151 locations averaged 36.5 sales per month, establishing a new record and in part prompting his comment contained in a news release about the company’s positive transition.

Williams elaborated about other ways Car-Mart continues to be in sales mode.

“We are completing the rollout of our new service contracts and the reaction from our customers has been very positive,” Williams said. “As we have previously stated, we believe that most of our existing dealerships could support 1,000 or more customers over time and that we have significant long-term growth potential from this existing dealership base.

“In addition, we will continue to open new locations and look for acquisition opportunities into the future,” he continued. “Our associates have done outstanding work in very difficult and uncertain times and have demonstrated how nimble our business can be. We have over 2,000 associates supporting over 88,000 customers, and they come to work every day to make a difference in the lives of others.”         

Car-Mart also is making a difference for its shareholders as the company highlighted net income of $43.5 million, or diluted earnings per share of $6.19, for the quarter ended April 30. In the closing quarter of the previous fiscal year, Car-Mart posted net income of $9.3 million, or diluted earnings per share of $1.35.

The improvement came since Car-Mart set a record with $279 million in revenue during the closing quarter.

The company mentioned the prior-year quarter included an $11.7 million (diluted earnings per share decrease of $1.42) pretax charge to increase the allowance for credit losses due to the COVID-19 pandemic.

Car-Mart generated the year-over-year improvement in part because of the gains made at the time of vehicle delivery.

The company reported its average retail price for vehicles retailed during the 2021 fiscal year was $13,621, resulting in gross profit per retail unit of $5,790. Those figures represented a 15.5% year-over-year rise in retail price (up from $11,793) and a 15.8% increase in gross from a year earlier (up from $4,999).

And here’s another likely reason why Williams was so pleased with Car-Mart’s collections efforts. The company said its accounts 30 days past due finished the 2021 fiscal year at 2.6%. That’s down from 6.2% registered at the end of the previous fiscal year even as the number of active accounts increased from 80,669 to 88,092.

Car-Mart chief financial officer Vickie Judy mentioned several other positive metrics about the company’s portfolio and balance sheet.

“Net charge-offs for the quarter, as a percentage of average finance receivables, were down to 4.8% compared to 5.6% in the prior-year quarter. As a result of the improved credit losses as well as our outlook for projected losses, we lowered our allowance for credit losses from 26.5% to 24.5% as a percentage of finance receivables, net of deferred revenue,” Judy said in the news release.

“Our debt, net of cash, to finance receivables is 27.6%, compared to 25.1% at the end of the fourth quarter of fiscal 2020. During the fiscal year, we added $188.4 million in receivables, increased inventory by $45.8 million, repurchased $10.6 million of our common stock, and funded $9.0 million in capital expenditures, a total of $253.8 million, with only a $67.0 million increase in debt, net of cash. These metrics, a strong balance sheet and strong cash-on-cash returns position us to continue to add customer count and grow dealerships,” Judy added.

With robust sales, customers maintaining their monthly payments and outstanding debt in control, Williams reiterated how upbeat he is about Car-Mart.

“We are pleased with our results and are optimistic about our ability to continue to grow the company as we move forward,” Williams said. “We have a unique position in the market and believe that we have an obligation to serve significantly more customers — we improve lives by reducing stress related to our customers’ local transportation needs. We give our customers peace of mind by keeping them on the road and supporting them at the very highest levels. We are clearly seeing the benefits and the power and potential of the various investments we have been making to the model.

“It has been a very difficult year with the pandemic and social unrest in our country, but our team has stayed focused on taking care of each other and our customers and we have become stronger as a result of these challenges,” he added.

Car-Mart seeing uplift from online credit applications

Earlier in its fiscal year, America’s Car-Mart began to make its credit application available online, so the chain of buy-here, pay-here stores could begin the underwriting process with potential buyers before they arrive at one its dealerships.

After announcing operating results for the third quarter of fiscal year 2020, Car-Mart president and chief executive officer Jeff Williams described what the addition to its online platform did for the company.

“We’ve had our online credit application in place, just beginning this fiscal year, and we’re getting a lot of traffic online,” Williams told the investment community during Car-Mart’s quarterly conference call. “We’re getting a lot of applications online, and we’re doing a fair job of converting those applications to physical visits to the dealerships.

“The close rate for those sales is pretty high,” Williams continued. “We’re really fairly new into that effort at this point, but we’re optimistic. We’re good now, but we’re going to get better as far as our digital efforts. But they certainly have increased our traffic and we’ve seen some good results so far.”

Car-Mart retailed a total of 39,600 vehicles in the quarter, working out to be sales volume productivity of 30.6 retail units sold per store per month. That performance is up from 27.9 vehicles per store per month for the prior-year quarter.

With customers getting the credit process started online, Williams explained it allows Car-Mart personnel to stress the company’s value proposition when potential customers arrive at one of its 145 locations.

“We do emphasize our lower interest rate, our shorter term, the total cost of ownership with Car-Mart, and then the peace of mind that’s so important to the quality of lives of our customers,” Williams said during the call. “When you put all that together, what we offer is superior to other offerings in the market.

“There are a lot of other offerings in the market and competition is very high,” he continued. “But we’re doing good in a market because of our efforts to really block and tackle and treat these customers at the highest level.”

In a press release distributed by the company Williams added, “As we have said, we believe that most all of our dealerships, under the direction of our talented general managers, can support a higher number of customers over time.  We have significant growth opportunities by leveraging our current footprint. The top-line growth we are experiencing supports this view.”

Earlier in the quarter, Car-Mart entered into a definitive agreement to purchase the ongoing dealership assets of Taylor Motor Company and Auto Credit of Southern Illinois, based in Benton, Ill.

“We are very excited for this opportunity and to be gaining three dealership locations in Marion, Benton and Mount Vernon, Illinois, as well as a vehicle reconditioning location in Benton, Illinois.  The existing finance receivables will be excluded from the purchase and will be collected by the seller.  The transaction will include leases on the related properties.  Illinois will represent our 12th state and these locations are near existing Car-Mart dealerships in surrounding states,” Williams said at the time of the move.

“Taylor Motors has served southern Illinois for over 88 years and has strong sales volume productivity with a dominant market position in its service areas. The company has operated at a very high level for over 25 years under the leadership of Steve Taylor, a third-generation owner, and his talented, experienced team of associates,” Williams continued.

“Like Car-Mart, Steve and his team focus on keeping customers on the road by selling good, solid mechanically sound vehicles and taking care of customers after the sale. Steve and his team will be joining our team and Steve will be contributing to our expansion efforts into the future,” Williams went on to say.

While the transaction was expected to close in January, Car-Mart said it was still in the works when it shared its Q3 results in February.

“We are close to completing our acquisition of Taylor Motors. We had hoped that it would have closed in January, but it’s taking a little longer than expected to obtain the necessary licenses in a new state for us,” Williams said, who then shared details about the company’s future growth plans.

“We plan to open our Cabot, Ark., dealership in the fourth quarter, which will give us six new dealerships for fiscal year 2020,” he said. “New dealership openings are an important part of our growth plans and we will continue to add locations at a rate that matches our ability to support this high touch business.

“We also have locations in Edmond, Okla.; Chattanooga, Tenn.; and Norman, Okla., in process for this upcoming fiscal year,” Williams went on to say.