America's Car-Mart, a used-car retailer geared toward financially-strained customers, fell in after-hours trading Wednesday after it reported mixed fiscal first-quarter earnings, even though it said auto prices were easing.
However, a measure of unrecoverable debt for the company rose, as last year's stimulus boost gives way to this year's inflation. And it set aside more money for credit that could go bad.
The company reported the results as Wall Street tries to gauge demand for used cars — whose prices skyrocketed over the past year — and potential fissures in the auto-loan market as inflation squeezes consumers.
CRMT Stock, Auto Stocks
The company, which runs more than 150 locations across 12 states in the central and southern U.S., earned $2 per share. That was well below estimates for $3.15 per share. Sales of $345 million beat expectations for $322 million. Unit volumes rose 2.1%, after falling the prior quarter.
"We are seeing car prices level off and we expect a gradual flattening as we move forward — better news for consumers," CEO Jeff Williams said in a statement.
America's Car-Mart sells older used cars and provides financing to consumers. Many of those consumers, it says, have limited credit or past issues with it.
Williams on Wednesday said that industry credit results were "normalizing." He added: "We are seeing customers coming into our market as lending standards tighten above us."
He said the current backdrop for the often older used cars it sells was still difficult. Used-car prices were still high. Parts for the often older vehicles it sells were still harder to get.
Net charge-offs — a measure of debt a company doesn't think it can get back — came in at 5.6% of average receivables. That was up from 4.3% a year ago. Provisions for credit losses jumped 53% to $82.9 million.
CRMT stock fell 5.1% to 113.33 after hours on the stock market today. The stock was extended from a double-bottom base with a 109.04 buy point.
Shares have a 91 Composite Rating. Their EPS Rating is 79.
Among other auto stocks, CarMax was unchanged after hours, after losing 4% during the regular session. Carvana lost 0.8%, after sliding 9% during the day. AutoNation added 0.6% late Wednesday. During regular trading, it fell 4%.
Used Car Prices
Last year, a chip shortage and Covid-related production constraints overseas drove prices higher for a shorter supply of new vehicles. With fewer new vehicles available, customers flocked to used vehicles, pushing up prices there.
The typical used car sold for an average of $28,012 in June, Kelley Blue Book said late last month. That figure marks a $300 decrease from May.
Overall, higher prices for cars this year have boosted sales figures at retailers like America's Car-Mart and CarMax. But Oppenheimer analysts, in a research note on Tuesday, said "waning demand for more pricey pre-owned vehicles," along with higher costs and other miscues, had hurt sales at Carvana recently.
Auto stocks in IBD's Retail / Wholesale Automobile and Auto Manufacturers groups have rebounded over recent days. But with interest rates rising, there were also signs of fewer customers trying to take out auto loans.
JPMorgan Chase, during its earnings call last month, said that auto-loan originations fell 44% from record heights last year, "due to continued lack of vehicle supply and rising rates."
Earnings elsewhere suggested growing worry about customers falling behind on their car payments. Lithia & Driveway, a new and used-car retailer, noted last month that it had set aside more reserves to cover souring credit.
