Car-Mart Reports 2% Revenue Drop in Q1

Key Points

• Revenue (GAAP) declined 1.9% to $341.3 million in Q1 FY2026, falling short of expectations and driven by a 5.7% drop in retail units sold.

• Gross profit margin improved to 36.6%, while net loss per share (GAAP) widened to ($0.69), compared to ($0.15) in Q1 FY2025.

• Inventory constraints and elevated operating expenses weigh on results, with technology investments and credit portfolio risks remaining key factors.

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America's Car-Mart (NASDAQ:CRMT), a leading used vehicle retailer and finance company focused on smaller U.S. cities, announced its Q1 FY2026 results on September 4, 2025. The company reported GAAP revenue of $341.3 million, which fell 1.9% year over year and came in below analyst expectations. Retail unit sales dropped 5.7%, and net loss per diluted share (GAAP) widened to ($0.69) from ($0.15) in the prior-year period. Despite better gross profit margins, the quarter marked a setback compared to last quarter’s optimism, reflecting ongoing challenges in inventory, credit losses, and operating costs.

Business Overview and Strategy

America's Car-Mart operates 154 dealerships across the southern and central U.S, specializing in selling older model used cars with in-house financing geared toward customers who often have limited access to traditional credit. Its business depends on vehicle sales volume, margins on each unit, and successful collection of loan payments. It also manages all aspects of dealership operations, including inventory procurement, sales, underwriting, and collections.

Recently, the company's strategy has focused on tight cost control, enhancing technology tools, and improving portfolio quality. Key success factors include optimizing collections, increasing credit quality, managing inventory given supply and price constraints, and upgrading digital infrastructure to drive collections and efficiency.

Key Developments and Financial Performance

The quarter’s most significant development was a decline in both sales and profitability. Retail units sold dropped to 13,568, a 5.7% fall from last year, as management cited fewer vehicles available for sale. Procurement costs for used vehicles rose about 5.2%, meaning each unit required more borrowing, reducing inventory levels. Customer demand was elevated, as evidenced by a 10% year-over-year increase in credit applications, suggesting demand is holding up, but capital structure limits constrained inventory on hand.

On the financial side, total revenue decreased 1.9%, with same-store revenue down 4.1%. However, the average retail sales price edged up 1.4%. Gross profit margin expanded to 36.6%, up 1.6 percentage points year over year. Management attributed this to vehicle pricing adjustments, better sales of ancillary products, fewer vehicle repairs, and improved recovery on wholesale sales.

Operating expenses were a challenge. Selling, general, and administrative (SG&A) expense grew 10.1% to $51.4 million (GAAP), and SG&A as a percentage of sales increased to 18.6% from 16.3% last year (GAAP). The increase reflects investments in both people and technology initiatives, which management expects to partially unwind starting in the next quarter. Net loss attributable to common shareholders widened to $5.75 million, or ($0.69) per diluted share (GAAP), a substantial deterioration from the prior-year period.

The company’s credit portfolio showed mixed results. Net charge-offs as a percent of average finance receivables, which measures accounts written off as bad debt, rose slightly to 6.6%. The allowance for credit losses improved as a percentage of the portfolio to 23.35% as of Q1 FY2026, but the overall provision for credit losses increased by 8.0%. Delinquencies—accounts more than 30 days overdue—ticked up to 3.8%, indicating a rise in late or missed payments. Total collections, including interest and fees, rose 6.2% to $183.6 million, and the average total collected per active customer per month increased by 4.1% to $585.

On the technology and platform side, the company completed the rollout of its upgraded Loan Origination System (LOS V2), featuring advanced risk scoring and risk-based pricing, across its entire footprint excluding acquisitions. Nearly 71.8% of its customer portfolio now uses enhanced credit standards as of Q1 FY2026, and higher-quality borrowers accounted for a bigger share of new loans. America’s Car-Mart also upgraded its ‘Pay Your Way’ platform, nearly doubling the number of customers enrolled in recurring payments. This shift should create steadier cash flows and reduce costs as collection methods move further online.

From a balance sheet perspective, total liquidity improved, with cash and restricted cash up 23% year-over-year to $121.4 million. The company completed a $172 million asset-backed securitization at a 5.46% coupon on August 28, 2025, reducing interest costs compared to previous rounds and freeing up borrowing capacity. Debt-to-finance receivables improved to 51.1%.

On the operations front, the company ended the period with 154 stores, down slightly from the 156 at the end of the prior year. Average units sold per store per month declined 4.9%, primarily tied to inventory supply rather than reduced demand. Active customer count increased 1.4% to 104,691. There were no new dealership acquisitions or openings announced this quarter.

No material one-time events or regulatory updates were highlighted. The company continues to operate under enhanced compliance standards and did not report major changes in the regulatory environment.

Looking Ahead

Management did not provide explicit financial guidance for the next quarter or for the remainder of the year. Instead, it pointed to continued execution on technology deployment, risk-based pricing, and margin improvements as priorities. Leaders signaled cautious optimism that recent investments in underwriting systems, digital payments, and portfolio quality will eventually support higher volumes, once inventory and capital constraints ease.

Investors should watch for tangible results from the company’s technology initiatives and for improvement in operating costs as tech investments taper. Inventory supply, delinquency and charge-off rates, and further evolution of SG&A expense will be important to monitor. The company’s ability to meet its margin targets and control credit losses remains central to its strategy as the used car finance sector continues to evolve.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.

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