Car-Mart: 06 Gross Profit Down 2% Due to Higher Vehicle Costs
BENTONVILLE, Ark. (July 7, 2006) — Gross profits for America's Car-Mart fell 2 percent for fiscal year 2006 due to higher vehicle costs and higher expenses in preparing units for sale, company executives reported Thursday.
Cart-Mart's income for the year decreased 7.1 percent to $16.7 million, as compared to $8 million for the previous year, according to executives. As for full-year retail unit sales, they increased 7.9 percent to 27,416, compared to 25,399 in FY 2005.
Moreover, the company posted same-store revenue growth of 9.8 percent for the year versus 11.8 percent for the prior timeframe. Meanwhile, finance receivables grew $32.9 million, or 21.6 percent, hitting a year-end balance of $182.2 million.
Looking at revenue for the year, it increased 14.4 percent to $234.2 million, compared to $204.8 million for the prior period.
"We are pleased with our annual revenue growth of 14.4 percent, as well as our same-store revenue growth of 9.8 percent," explained T.J. "Skip" Falgout III, chairman and chief executive officer.
For the fourth quarter, income climbed 5.4 percent to $4.6 million, as compared to $4.3 million in same quarter of the previous year. Retail unit sales were up 6.9 percent to 7,096 vehicles for the period, compared to 6,638 in the same timeframe of FY 2005.
Additionally, same-store revenue growth came in at 8.3 percent for the quarter, compared to 12.6 percent in the same quarter of the prior year. Overall, revenue increased 13 percent to $62.5 million, compared with $55.2 million in the same period of FY 2005. Company executives also noted that finance receivables grew $9.3 million, or 5.3 percent.
"We are also pleased with our fourth-quarter credit losses, which came in at 19.6 percent versus 20.4 percent in the fourth quarter of 2005," Falgout said. "The net charge-offs for the third and fourth quarters, as a percentage of beginning of quarter accounts receivable, were lower than each of the previous 13 quarters.
"However, our gross profit percentage decreased by 2 percent for the year, most of which can be attributed to an increase in the cost of vehicles, as well as higher expenses associated with preparing vehicles for sale," he continued. "We are beginning to see some improvement in this area by modifying our purchasing to capitalize on our size and multi-regional presence to acquire adequate inventory at reasonable prices while at the same time, instituting additional controls and oversight to reduce vehicle repair and reconditioning expenses."
William "Hank" Henderson, president, also noted, "We expect our unit sales to grow at a faster rate than last year, which was just under 8 percent, as we continue to see positive results from our recent dealership expansion projects and new store growth. Our newly opened lots, including our two acquisitions in Lexington, Ky., and in Tuscaloosa, Ala., are coming along nicely. We have already opened three new lots since May 1, and six more are in process."
Looking forward, executives said they anticipate revenue will grow from 10 to 14 percent in fiscal 2007. The company said this estimate includes a planned addition of 12 new stores, along with revenue growth at existing facilities.
In his daily commentary, Jerry Marks, of AutoRetailStocks.com, said, "The cost of the car is going up, and rising interest rates are not likely helping either. Nonetheless, from what we gleaned on the conference call, it sounds like the company is getting a competitive advantage as independent players are requiring a higher down payment than what they need."