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America's Car-Mart Inc (CRMT) Reports Mixed Q2 2024 Results Amid Economic Challenges
Revenue increased by 2.8% to $361.6 million, despite a decrease in retail unit sales.
Gross margin improved to 34.3%, up from 32.1% in the same quarter last year.
Net loss per share was $4.30, compared to diluted earnings per share of $0.48 in Q2 FY23.
Net charge-offs as a percentage of average finance receivables rose to 7.2% from 5.8%.
On December 5, 2023, America's Car-Mart Inc (NASDAQ:CRMT) released its 8-K filing, detailing the financial results for the second quarter ended October 31, 2023. The company faced a challenging economic landscape, marked by inflationary pressures and a dynamic automotive retail market.
Financial Performance Overview
America's Car-Mart Inc (NASDAQ:CRMT) reported a modest revenue increase of 2.8% to $361.6 million, primarily driven by a 23% increase in interest income and a 5.6% rise in the average retail sales price. However, retail unit sales saw a decline of 4.6%. The company's gross margin showed resilience, improving to 34.3% from 32.1% in the same quarter of the previous fiscal year.
Challenges and Adjustments
The company's net income took a hit, with a reported loss per share of $4.30, a stark contrast to the $0.48 diluted earnings per share in the second quarter of the previous fiscal year. This was largely due to an increase in the allowance for credit losses to 26.04%, resulting in a significant EPS reduction after tax adjustments. The net charge-offs as a percentage of average finance receivables also increased to 7.2%, compared to 5.8% in the prior year's quarter.
Strategic Moves and Operational Highlights
Despite the setbacks, America's Car-Mart Inc (NASDAQ:CRMT) is making strategic moves to enhance its market presence, including a one-location acquisition expected to close in the third quarter. The company's President and CEO, Doug Campbell, emphasized the focus on delivering value and driving efficiencies, particularly in gross margin improvements. However, he also acknowledged the need for agility in cost structure management to navigate the current economic environment.
"Our second quarter results reflect the Car-Mart teams commitment and focus on delivering value to our customers during a challenging economy. Revenue was up 2.8%, primarily due to interest income despite unit sales being down 4.6% during the quarter. The persistent inflationary environment impacted existing customers, which was evident in our credit losses. This required an increase in the allowance for credit losses which subsequently impacted the bottom line for the quarter. We believe these headwinds regarding credit loss are shorter-term in nature. The operational investments weve made are driving greater efficiencies in the business, one of which was gross margin, which was a bright spot during the quarter. However, we are equally focused on being more agile regarding our cost structure to effectively navigate this environment. We believe this will leave our consumer and our Company well-positioned for success in the long term." - Doug Campbell, President and CEO, Americas Car-Mart
Financial Statement Summaries
The balance sheet reflects a mixed picture, with total assets at $1.487 billion as of October 31, 2023, compared to $1.301 billion the previous year. The company's equity stood at $476.6 million, a slight decrease from $492.3 million. Cash and cash equivalents were reported at $4.3 million, with a notable increase in restricted cash from collections on auto finance receivables to $90.2 million.
The cash flow statement indicates operational challenges, with net cash used in operating activities totaling $(76.1) million for the six months ended October 31, 2023. However, the company managed to provide net cash through financing activities amounting to $104.2 million during the same period.
Looking Ahead
America's Car-Mart Inc (NASDAQ:CRMT) is actively managing its credit losses and underwriting processes to adapt to the evolving economic conditions. The company's strategic acquisitions and cost management initiatives are aimed at strengthening its position for long-term success. As the automotive retail landscape continues to shift, America's Car-Mart Inc (NASDAQ:CRMT) is poised to navigate through these challenges with a focus on operational efficiency and customer value.
For a detailed analysis of America's Car-Mart Inc (NASDAQ:CRMT)'s financial results, investors and interested parties can access the full earnings report and conference call transcript on the company's website.
Explore the complete 8-K earnings release (here) from America's Car-Mart Inc for further details.
This article first appeared on GuruFocus.
