2 ways tighter credit helped Car-Mart

BENTONVILLE, Ark. - 

Along with elaborating a bit about his upcoming retirement, America’s Car-Mart chief executive officer William “Hank” Henderson described how underwriting tightening in other areas of the auto-finance market is benefitting the chain of buy-here, pay-here dealerships.

The market change is improving not only the caliber of customer Car-Mart saw during the first quarter of its 2018 fiscal year that ended on July 31, but also the quality of vehicles the company is able to stock at its 140 stores.

“We’re seeing some customers circle back,” Henderson said during Car-Mart’s quarterly conference call with investors. “They’ve been over there and tried the other side, and now they’re back. And I think that’s evident and actually our sales for peak customers is maybe at an all-time high. It’s very high during this first quarter.

“And then also I think we’re, as we mentioned, doing a little better job with our inventory, seeing some improvements there. And so I think all those things combined help push up the store productivity,” he continued.

Car-Mart posted increased sales volume productivity with 28.2 retail units sold per store per month, up from 27.9 for the prior year quarter.

All told, the company’s stores retailed 11,837 vehicles during the quarter with an average retail price of $10,386.

“We are pleased with our continuing efforts to improve the quality of our inventory and improve inventory turns and efficiencies, and these efforts are having a positive effect and will continue to benefit us as we move forward,” Car-Mart president Jeff Williams said.

“We will remain aggressive with our inventory management, but we will ensure that we have a good selection of quality cars, trucks and SUVs in our dealerships to attract our target customer,” Williams continued.

“As credit gets a little tighter in the markets above us, the flow of product then in our market becomes much better,” he went on to say. “We’ve been in a period for several years now where the flow into our markets has been stuck. It's maybe the new-car dealerships because that financing has been available.

“So as it tightens up, we get a better flow of products, and we get to start cherry-picking a little bit,” Williams added.

A few other metrics of note from Car-Mart’s Q1 performance included:

—Gross profit margin percentage decreased to 41.4 percent from 41.8 percent for the prior-year quarter.

—Net charge-offs as a percent of average finance receivables stood at 6.4 percent, up from 6.2 percent for prior-year quarter.

—Accounts more than 30 days past due increased to 4.6 percent of the portfolio, up from 4.4 percent at close of the previous year’s quarter.

—Provision for credit losses came in at 26.6 percent of sales versus 25.7 percent for prior-year quarter.

More on executive transition

As BHPH Report previously published, Car-Mart also announced Henderson will retire as CEO at the end of the year with Williams replacing him. Henderson discussed the move again during the conference call.

“It has been an incredible fantastic experience to be part of such a great team of people to help and build and grow this company into what is today, and I feel truly blessed to have had this opportunity,” Henderson said.

“Tremendous amount of gratitude to the hard working dedicated people with such high characters that I have been so very fortunate to work with throughout this time,” he continued. “We’ve been through some great times, and we’ve been through some very challenging times all along the way.

“They fought hard to preserve our company culture, and I cannot even begin to ever thank them all enough for their tireless efforts,” Henderson went on to say.

An analyst asked about who might take Williams’ position as chief financial officer and whether it will be a candidate from within the company or if Car-Mart might choose someone from outside its current executive ranks.

“We are in the process, and we’ll have some news for you guys just as soon as we can,” Williams said.

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