America's Car-Mart (NASDAQ:CRMT) Misses Q3 Sales Targets, Stock Drops
Used-car retailer America’s Car-Mart (NASDAQ:CRMT) fell short of analysts' expectations in Q3 FY2024, with revenue down 8.2% year on year to $299.6 million. It made a GAAP loss of $1.34 per share, down from its profit of $0.23 per share in the same quarter last year.
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America's Car-Mart (CRMT) Q3 FY2024 Highlights:
Revenue: $299.6 million vs analyst estimates of $351 million (14.6% miss)
EPS: -$1.34 vs analyst estimates of -$0.65 (-$0.69 miss)
Free Cash Flow of $9.73 million is up from -$36.28 million in the same quarter last year
Gross Margin (GAAP): 17.3%, down from 17.7% in the same quarter last year
Same-Store Sales were down 9.3% year on year
Store Locations: 154 at quarter end, decreasing by 1 over the last 12 months
Interest Income: 19.8% of revenue, up from 15.7% in the same quarter last year
Market Capitalization: $398.3 million
With a strong presence in the Southern and Central US, America’s Car-Mart (NASDAQ:CRMT) sells used cars to budget-conscious consumers.
Vehicle Retailer
Buying a vehicle is a big decision and usually the second-largest purchase behind a home for many people, so retailers that sell new and used cars try to offer selection, convenience, and customer service to shoppers. While there is online competition, especially for research and discovery, the vehicle sales market is still very fragmented and localized given the magnitude of the purchase and the logistical costs associated with moving cars over long distances. At the end of the day, a large swath of the population relies on cars to get from point A to point B, and vehicle sellers are acutely aware of this need.
Sales Growth
America's Car-Mart is a small retailer, which sometimes brings disadvantages compared to larger competitors that benefit from economies of scale. On the other hand, one advantage is that its growth rates can be higher because it's growing off a small base.
As you can see below, the company's annualized revenue growth rate of 18.2% over the last four years (we compare to 2019 to normalize for COVID-19 impacts) was excellent despite not opening many new stores, implying that growth was driven by increased sales at existing, established stores.
This quarter, America's Car-Mart missed Wall Street's estimates and reported a rather uninspiring 8.2% year-on-year revenue decline, generating $299.6 million in revenue. Looking ahead, Wall Street expects sales to grow 5.7% over the next 12 months, an acceleration from this quarter.
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Same-Store Sales
America's Car-Mart has generated solid demand for its products over the last two years. On average, the company's same-store sales have grown by a healthy 11.9% year on year. Given its flat store count over the same period, this performance stems from increased foot traffic at existing stores or higher e-commerce sales as the company shifts demand from in-store to online.
In the latest quarter, America's Car-Mart's same-store sales fell 9.3% year on year. This decline was a reversal from the 12.3% year-on-year increase it posted 12 months ago. We'll be keeping a close eye on the company to see if this turns into a longer-term trend.
Key Takeaways from America's Car-Mart's Q3 Results
We struggled to find many strong positives in these results. Its revenue unfortunately missed analysts' expectations as its sales volumes fell short (11,664 retail units sold vs Wall Street estimates of 14,523). Its gross margin also missed estimates. On the bright side, the management team noted its financing division is doing well thanks to higher interest rates. Interest income was up 16% year on year and clocked in at 19.8% of revenue, up from 15.7% in the same quarter last year. Overall, the results could have been better. The company is down 5.3% on the results and currently trades at $59 per share.
America's Car-Mart may have had a tough quarter, but does that actually create an opportunity to invest right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.
