Record demand for short-term cash loans drives higher profits and positions pawn shop operator EZCorp (EZPW) for continued success as the economic outlook weakens.
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EZCorp (EZPW) delivered another impressive set of quarterly results on July 31. Fiscal 2024 Q3 revenues climbed 10.0% year-over-year to a third-quarter record $281.4 million, exceeding the consensus forecast by $1.9 million. This was primarily driven by a 14.1% jump in the level of pawn loans outstanding (PLO) compared to Q3 of fiscal 2023, which drove a 14.9% increase in pawn service charges (PSC) to $107.8 million. The company also saw merchandise and jewelry scrapping sales gain 6.9% and 10.5% to $158.1 million and $15.4 million, respectively.
Although aged inventory rose slightly from 2.3% in Q2 to 3.2%, this was solely due to slower turnover of luxury handbags in its three Max Pawn stores in Las Vegas. Excluding this category, aged general merchandise remained under 1%. And with gross margins on this sold merchandise actually improving by 1% sequentially to 36%, adjusted earnings climbed 15.0% to 23 cents per share, which was a penny better than expected.
What’s more, with the challenging macro-economic climate continuing to fuel robust customer interest in short-term cash solutions, EZPW’s PLO balance reached an all-time high $261.7 million by the end of the quarter. The company also expanded its footprint by adding 12 new stores in Q3, including six in Latin America and one new and five acquired in the U.S. I think that will also continue to bode well for EZPW’s points-based EZ+ Rewards program, which incentivizes customers to transact more and saw its number of enrolled customers rise by a further 9% over the previous quarter to 5 million. This has me believing that EZPW’s operating performance will likely continue to excel. If so, its market-bucking gain of 6% on this news could be just the start of a more meaningful climb higher.
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