America’s Car-Mart Inc. (CRMT) reported fiscal 2010 fourth-quarter results before the opening bell on Thursday. The company’s earnings expanded 40.9% to $7.2 million, or 62 cents per share from $5.1 million, or 43 cents per share in the prior-year quarter.
Quarterly earnings also topped the Zacks Consensus Estimate of 59 cents. Shares of the company gained more than 2% in early morning trading on the Nasdaq.
America’s Car-Mart currently operates 97 automotive dealerships across eight states in the U.S. and is one of the largest automotive retailers in the country focused exclusively on the “Buy Here/Pay Here” segment of the used car market. The company operates primarily in small cities and rural locations throughout the South-Central U.S., and provides financing for most of its customers.
Quarterly Details
America’s Car-Mart’s total revenues expanded 14.0% to $88.8 million from $77.9 million in the year-ago period. The growth was primarily driven by an 11.8% growth in same-store sales coupled with the launch of five new dealerships in 2010.
Sluggish economic conditions have benefited used car retailers as customers reeling under the impact of high unemployment in the worst recession in decades continue to look for value deals. During the quarter, the company sold 8,225 units, compared to 7,391 units in the same period last year, while the average selling price rose marginally by 0.3% to $9,220.
America’s Car-Mart’s gross profit expanded 18.5% year-over-year to $43.5 million, while gross margin increased 180 basis points (bps) to 49.0%. The company also recorded an improvement in credit quality as net charge-offs reduced to 6.0% from 6.3% in the year-ago period, while provision for credit losses, as a percentage of sales, declined 150 bps year-over-year to 19.3%.
Balance Sheet & Cash Flow
America’s Car-Mart exited the quarter with cash and cash equivalents of $268,000, compared to $168,000 in the year-ago quarter. However, the company’s total debt-to-capitalization ratio increased to 18.0% at the end of the quarter, compared to 16.0% in the prior-year period.
During the quarter, the company deployed $10.9 million towards share buybacks and $2.7 million towards capital expenditures. The company also stated that its board has increased total share repurchase authorization to 1 million shares.
Outlook & Zacks Consensus
Looking ahead, America’s Car-Mart plans to expand its dealership network by 10% in fiscal 2011 as macroeconomic headwinds continue to attract more customers looking for affordable vehicles. The Zacks Consensus Estimate on the company’s earnings for the year ending April 2011 has moved up 2 cents over the past month to $2.57 per share as 1 of 6 covering analysts upwardly revised his or her estimate.
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