America's Car-Mart delivered a sharp surprise loss Tuesday as it set aside more money for credit that could go bad. CRMT stock plunged below a key technical level.
Other new and used car dealers also fell, including Carvana, AutoNation and CarMax.
America's Car-Mart, a used-car retailer and lender, tied credit loss increases to the impact of stubborn inflation on customers. Policy makers have hiked interest rates to fight rapid inflation.
America's Car-Mart Earnings
The company lost $4.30 per share on revenue of $361.6 million for its fiscal second quarter, which ended Oct. 31.
Analysts were expecting earnings per share of 79 cents and sales of $376 million, FactSet shows.
Unit sales fell nearly 5% during the quarter. Allowance for credit loss grew to 26% from about 24% in the prior quarter, resulting in a $28 million charge that weighed on earnings, the company said.
CRMT Stock Gaps Down
Shares of America's Car-Mart sank as much as 26% on the stock market today, hitting a 52-week low. CRMT stock pared losses but still closed down 18% to 68.29. Shares gapped below the 50-day moving average on Tuesday.
America's Car-Mart stock regained that key technical level Monday ahead of earnings.
Carvana stock fell 3.3% on Tuesday, after surging 13.8% on Monday and 12.4% on Friday. AutoNation stock also retreated, with both below their 200-day lines.
Ally Financial, one of the largest car loan issuers, edged higher Tuesday. The Detroit-based company said in April it expects to finance few car loans due to an uncertain economy.
Used-Car Dealership: 'Buy Here, Pay Here'
America's Car-Mart calls itself "a buy here, pay here" used-car dealership. It touts one of the lowest interest rates and shortest contract terms in the industry.
In fiscal Q2, the higher allowances for credit losses underscored "the challenges and economic pressure on our subprime consumer," the company said.
It expects these headwinds to be "shorter term in nature," the America's Car-Mart earning release said.
"As vehicle prices normalize and potentially decrease over time, credit losses are expected to decline," the release added.
Subprime Auto Loans Worsen In October
Auto loan performance deteriorated in October, Cox Automotive said on Nov. 20.
Almost 2% of auto loans and 7% of subprime loans were severely delinquent in October. That was unchanged from September and was the highest October rate dating back to at least 2006.
Defaults of auto loans grew by 4% in October from September and were up 31% from a year ago. Defaults of subprime auto loans rose by 5% and were up 20% vs. a year earlier.
The default rate year-to-date through October is 2.69%, Cox Automotive said.
