America's Car-Mart Q2 Sales Beat Expectations, Stock Gains On Strong Margins, Interest Income Growth

America’s Car-Mart, Inc. CRMT shares are trading higher on Thursday.

The company reported second-quarter sales of $347.269 million (down 3.5%), beating the street view of $344.37 million. Revenues fell owing to a decrease in retail units sold. 

The decline in revenue was partially offset by an increase in interest income and a $13.2 million benefit in service contract revenue.  

Adjusted gross margin as a percentage of sales for the quarter was 36.5%, an improvement of 200 bps over the prior year’s quarter and 150 bps sequentially.

“Our initiatives in improving wholesale results and pricing improvements are reflected in these improved margins,” said the company.

America’s Car-Mart reported a 3.6% increase in interest income to $61.495 million. Total collections grew by 3.3%, reaching $173.8 million.

“We improved deal structures, generated higher down payments, and benefited from higher collections and gross margins,” said President and CEO Doug Campbell.

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The allowance for credit loss as a percentage of finance receivables, net of deferred revenue and pending accident protection plan claims decreased from 25.00% on July 31 to 24.72% on Oct. 31.

The primary driver of this change was favorable performance in loans originated under LOS (improved underwriting system) and the improvements it is driving in the historical loss rates, America’s Car-Mart said.

The company reported an adjusted loss per share of 24 cents in the quarter under review.

During the quarter, the company increased finance receivables by $8.5 million, raised inventory by $7.6 million, and purchased $1.4 million in fixed assets. It also reduced debt by $49.6 million, net of cash.

“We’re closely managing expenses during ongoing implementation of technology upgrades to strengthen our operations,” Campbell added.

CRMT Price Action: America’s Car-Mart shares are trading higher by 18.25% to $54.04 at last check Thursday.

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Photo: Courtesy Americas Car-Mart