Financial Data and Key Metrics Changes - The company reported total sales of $7.5 billion, a 6% increase year-over-year, driven by higher volume despite lower prices [7][17] - Earnings per diluted share reached $1.38, marking a 42% increase compared to the previous year [17] - Total gross profit was $894 million, up 13% from the same quarter last year [17][18] - The company achieved a 42% growth in earnings per share, marking the fourth consecutive quarter of positive retail unit comps and double-digit year-over-year EPS growth [7][26] Business Line Data and Key Metrics Changes - Retail unit sales increased by 9%, with used unit comps up 8.1% [7][8] - Retail gross profit per used unit reached a record high of $2,407, an increase of $60 year-over-year [18] - Wholesale unit sales were up 1.2%, while average wholesale selling price declined by approximately $150 to $8,000 [8][18] - CarMax Auto Finance (CAF) originated over $2.3 billion, resulting in a sales penetration of 41.8%, which was 150 basis points below last year [11][12] Market Data and Key Metrics Changes - The company purchased approximately 336,000 vehicles during the quarter, a 7% increase from last year [8] - The digital capability supported 80% of retail unit sales, with 66% being omni-channel and 14% online [9] - The Net Promoter Score reached its highest level since the rollout of digital capabilities, indicating strong customer satisfaction [10] Company Strategy and Development Direction - The company is focused on enhancing its omni-channel experience and leveraging digital capabilities to drive sales and market share [5][10] - A new marketing campaign is set to launch later in the summer to promote the omni-channel experience and digital capabilities [10][22] - The company aims to achieve omni cost neutrality and improve operational efficiencies through strategic deployment of AI technology [20][21] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in sustaining sales growth and market share gains despite macroeconomic challenges [36][47] - The company anticipates service margin growth year-over-year, particularly in the first half of the year [23] - Management noted that the consumer sentiment is slightly less positive, but this has not significantly impacted buying habits [131] Other Important Information - The company doubled its share repurchase pace, buying back approximately 3 million shares for a total of $200 million [22] - The loan loss provision for the quarter was $102 million, influenced by seasonal sales and credit quality [12][16] Q&A Session Summary Question: How is the company viewing the sustainability of the recent acceleration in the used car business? - Management feels positive about the acceleration, attributing it to both macro factors and internal improvements in inventory management and pricing [34][36] Question: How should expenses be considered in the model moving forward? - Management emphasized their commitment to leveraging SG&A and finding efficiencies, indicating a focus on maintaining expense control [37][39] Question: How should comp growth be modeled for the balance of the year? - Management expects to continue growing sales and gaining market share, maintaining their outlook for the year [47] Question: Can you provide more color on the shift in non-prime lending? - Management confirmed that the held-for-sale transaction allows them to mitigate risk and supports growth in CAF income [50][55] Question: How is the marketing campaign aimed at increasing awareness of multi-channel capabilities? - The campaign focuses on educating consumers about their options and the flexibility of the buying experience [61][62] Question: How is the company addressing the financial stress of consumers? - Management noted that while consumers are slightly less positive, there has not been a significant impact on buying habits [131]

Financial Data and Key Metrics Changes - The company achieved total sales of $7.5 billion, a 6% increase year-over-year, driven by higher volume but partially offset by lower prices [6][17] - Earnings per diluted share (EPS) grew by 42% to $1.38, marking the fourth consecutive quarter of positive retail unit comps and double-digit year-over-year EPS growth [6][17] - Total gross profit reached $894 million, up 13% from the previous year, with retail gross profit per used unit at a record high of $2,407, an increase of $60 year-over-year [17][19] Business Line Data and Key Metrics Changes - Retail unit sales increased by 9%, with used unit comps up 8.1% [6][17] - Wholesale unit sales rose by 1.2%, while the average wholesale selling price decreased by approximately $150 per unit to $8,000 [7][17] - CarMax Auto Finance (CAF) originated over $2.3 billion, resulting in a sales penetration of 41.8%, which is 150 basis points below last year [11][12] Market Data and Key Metrics Changes - The company purchased approximately 336,000 vehicles during the quarter, a 7% increase from last year, with 288,000 vehicles sourced from consumers [7][8] - Digital capabilities supported 80% of retail unit sales, with 66% being omni-channel and 14% online [9][10] Company Strategy and Development Direction - The company is focused on enhancing its omni-channel experience, expanding gross profit, and managing credit spectrum expansion [4][5] - A new marketing campaign is set to launch later in the summer to promote the omni-channel experience and digital capabilities [10][22] - The company aims to achieve omni cost neutrality for the first time across three key metrics, indicating a strong focus on operational efficiency [20][21] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in sustaining sales growth and market share gains, attributing recent performance to both macro factors and internal improvements [36][47] - The outlook for the remainder of the year remains positive, with expectations for continued growth in sales and market share [47][48] Other Important Information - The company doubled its share repurchase pace, buying back approximately 3 million shares for a total of $200 million [22][27] - The loan loss provision for CAF was $102 million, influenced by seasonal sales and credit quality, with a total reserve balance of $474 million [12][14] Q&A Session Summary Question: Sustainability of used car business acceleration - Management noted that the acceleration is driven by both macro factors and internal improvements, with confidence in continued growth for the year [34][36] Question: SG&A expenses and future modeling - Management emphasized their commitment to leveraging SG&A and finding efficiencies, with a focus on maintaining expense control [37][39] Question: Guidance on comp growth for the balance of the year - Management indicated that they expect to continue growing sales and gaining market share, maintaining their outlook for the year [47][48] Question: Impact of student loans on consumer credit - Management reported that about 30% of their customers have student loans, but no material change in performance has been observed [71][72] Question: Marketing campaign details - The new marketing campaign aims to educate consumers about the omni-channel capabilities and the flexibility in purchasing options [60][62] Question: Credit penetration and growth strategy - Management confirmed plans to increase subprime penetration, targeting a growth rate of 50% in the future [65][66] Question: Share buyback spending trends - Management intends to modestly accelerate share buybacks throughout the fiscal year, based on valuation and cash flow dynamics [124][125]

Group 1 - Proactive provides fast, accessible, informative, and actionable business and finance news content to a global investment audience [2] - The company focuses on medium and small-cap markets while also covering blue-chip companies, commodities, and broader investment stories [3] - Proactive's news team delivers insights across various sectors including biotech, pharma, mining, natural resources, battery metals, oil and gas, crypto, and emerging technologies [3] Group 2 - Proactive is committed to adopting technology to enhance workflows and improve content production [4] - The company utilizes automation and software tools, including generative AI, while ensuring all content is edited and authored by humans [5]

Group 1: Earnings Performance - CarMax reported quarterly earnings of $1.38 per share, exceeding the Zacks Consensus Estimate of $1.18 per share, and up from $0.97 per share a year ago, representing an earnings surprise of 16.95% [1] - The company posted revenues of $7.55 billion for the quarter ended May 2025, surpassing the Zacks Consensus Estimate by 0.40%, compared to year-ago revenues of $7.11 billion [2] - Over the last four quarters, CarMax has surpassed consensus EPS estimates two times and topped consensus revenue estimates four times [2] Group 2: Stock Performance and Outlook - CarMax shares have declined approximately 21.3% since the beginning of the year, while the S&P 500 has gained 1.7% [3] - The company's earnings outlook, including current consensus earnings expectations for upcoming quarters, will be crucial for investors [4] - The current consensus EPS estimate for the coming quarter is $1.06 on revenues of $7.22 billion, and $3.76 on revenues of $27.53 billion for the current fiscal year [7] Group 3: Industry Context - The Automotive - Retail and Wholesale - Parts industry, to which CarMax belongs, is currently in the top 30% of over 250 Zacks industries, indicating a favorable industry outlook [8] - Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can impact CarMax's stock performance [5][6]

[First Quarter Highlights](index=1&type=section&id=First%20Quarter%20Highlights) CarMax reported **42.3% diluted EPS growth** to **$1.38**, with **9.0% retail used unit sales growth** and record gross profit per unit Key Financial Metrics | Metric | Q1 FY2026 | Q1 FY2025 | Change | | :--- | :--- | :--- | :--- | | Net Earnings per Diluted Share | $1.38 | $0.97 | +42.3% | | Retail Used Unit Sales Growth | +9.0% | N/A | N/A | | Comp Store Used Unit Sales Growth | +8.1% | N/A | N/A | | Wholesale Unit Sales Growth | +1.2% | N/A | N/A | | Total Gross Profit | $893.6M | $791.9M (calculated) | +12.8% | | Gross Profit per Retail Used Unit | $2,407 | $2,347 | +$60 | | Gross Profit per Wholesale Unit | $1,047 | $1,064 | -$17 | | CAF Income | $141.7M | $147.0M | -3.6% | | Share Repurchases | $199.8M | N/A | N/A | - The company bought **336,000 vehicles** from consumers and dealers, a **7.2% increase** year-over-year, with purchases from dealers rising **38.4%**[3](index=3&type=chunk) - SG&A expenses increased **3.3%** to **$659.6 million**, but the company achieved strong leverage, with SG&A as a percent of gross profit improving by **680 basis points**[3](index=3&type=chunk) [CEO Commentary](index=2&type=section&id=CEO%20Commentary) CEO Bill Nash highlighted the fourth consecutive quarter of positive retail comparable store sales and double-digit EPS growth - The company achieved its fourth consecutive quarter of positive retail comparable store sales growth[4](index=4&type=chunk) - The CEO emphasized that the company's customer-centric omni-channel experience is a key differentiator in a large, fragmented market, positioning it for future growth[4](index=4&type=chunk) [Business Performance Review](index=2&type=section&id=First%20Quarter%20Business%20Performance%20Review) Q1 performance showed broad growth: combined unit sales up **5.8%**, retail sales up **9.0%**, and gross profit surging **12.8%** [Sales Performance](index=2&type=section&id=Sales) Retail used unit sales increased **9.0%** with comparable store sales up **8.1%**, and digital platforms supported **80%** of retail sales Sales Performance Metrics | Sales Metric | Q1 FY2026 | YoY Change | | :--- | :--- | :--- | | Combined Retail & Wholesale Units | 379,727 | +5.8% | | Total Retail Used Units | 230,210 | +9.0% | | Comparable Store Used Units | N/A | +8.1% | | Total Wholesale Units | 149,517 | +1.2% | | Total Vehicles Bought | 336,000 | +7.2% | - Digital engagement remains high, with omni-channel sales accounting for **66%** and fully online retail sales making up **14%** of total retail unit sales[8](index=8&type=chunk) [Gross Profit Performance](index=2&type=section&id=Gross%20Profit) Total gross profit rose **12.8%** to **$893.6 million**, driven by record **$2,407** gross profit per retail used unit Gross Profit Metrics | Gross Profit Metric | Q1 FY22026 | YoY Change | | :--- | :--- | :--- | | Total Gross Profit | $893.6M | +12.8% | | Retail Used Vehicle Gross Profit | N/A | +11.8% | | Wholesale Vehicle Gross Profit | N/A | -0.4% | | Other Gross Profit | N/A | +31.3% | Gross Profit Per Unit | Gross Profit Per Unit | Q1 FY2026 | Prior Year | Change | | :--- | :--- | :--- | :--- | | Retail Used Vehicle | $2,407 | $2,347 | +$60 | | Wholesale Vehicle | $1,047 | $1,064 | -$17 | [Selling, General & Administrative (SG&A) Expenses](index=2&type=section&id=SG%26A) SG&A expenses increased **3.3%** to **$659.6 million**, improving **680 basis points** as a percentage of gross profit due to cost control - SG&A as a percent of gross profit improved to **73.8%** from **80.6%** in the prior year's quarter, a **680 basis point improvement** driven by gross profit growth and cost management[10](index=10&type=chunk) [CarMax Auto Finance (CAF)](index=2&type=section&id=CarMax%20Auto%20Finance%20%28CAF%29) CAF income decreased **3.6%** to **$141.7 million** due to higher loan loss provisions, despite expanding its non-prime funding program - The company expanded its non-prime funding program, earmarking **$637.9 million** of non-prime loans to be sold off the balance sheet, now classified as 'held for sale'[11](index=11&type=chunk)[12](index=12&type=chunk) - CAF income fell **3.6%** to **$141.7 million**, primarily because the provision for loan losses increased to **$101.7 million** from **$81.2 million** a year ago[13](index=13&type=chunk) - The total interest margin percentage increased to **6.5%** of average auto loans, up **30 basis points** from the prior year and prior quarter[14](index=14&type=chunk) - CAF's net financing penetration decreased to **41.8%** from **43.3%** in the prior year's first quarter[14](index=14&type=chunk) [Corporate Activities](index=3&type=section&id=Corporate%20Activities) CarMax repurchased **3.0 million shares** for **$199.8 million**, with **$1.74 billion** remaining, and opened two new centers - The company repurchased **3.0 million shares** of common stock for **$199.8 million** during the quarter[15](index=15&type=chunk) - As of May 31, 2025, **$1.74 billion** remained available for repurchase under the current authorization[15](index=15&type=chunk) - Two new stand-alone reconditioning/auction centers were opened in El Mirage, Arizona and Midlothian, Texas[16](index=16&type=chunk) [Supplemental Financial Information](index=4&type=section&id=Supplemental%20Financial%20Information) This section provides detailed financial and operational metrics, including sales, pricing, gross profit, and earnings highlights Sales Components (in millions) | Sales Components (in millions) | Q1 FY2026 | Q1 FY2025 | Change | | :--- | :--- | :--- | :--- | | Used vehicle sales | $6,103.4 | $5,677.5 | +7.5% | | Wholesale vehicle sales | $1,252.7 | $1,256.4 | -0.3% | | Total other sales and revenues | $190.4 | $179.5 | +6.1% | | **Total net sales and operating revenues** | **$7,546.5** | **$7,113.4** | **+6.1%** | Average Selling Prices | Average Selling Prices | Q1 FY2026 | Q1 FY2025 | Change | | :--- | :--- | :--- | :--- | | Used vehicles | $26,120 | $26,526 | -1.5% | | Wholesale vehicles | $7,959 | $8,094 | -1.7% | Gross Profit per Unit | Gross Profit per Unit | Q1 FY2026 | Q1 FY2025 | | :--- | :--- | :--- | | Used vehicle gross profit per unit | $2,407 | $2,347 | | Wholesale vehicle gross profit per unit | $1,047 | $1,064 | | Other gross profit per unit | $794 | $660 | Earnings Highlights (in millions) | Earnings Highlights (in millions) | Q1 FY2026 | Q1 FY2025 | Change | | :--- | :--- | :--- | :--- | | Net earnings | $210.4 | $152.4 | +38.0% | | Diluted weighted average shares | 152.6 | 157.7 | -3.2% | | **Net earnings per diluted share** | **$1.38** | **$0.97** | **+42.3%** | [Consolidated Financial Statements](index=11&type=section&id=Consolidated%20Financial%20Statements) This section presents unaudited consolidated financial statements, detailing CarMax's financial position and performance [Consolidated Statements of Earnings](index=11&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20EARNINGS) Net sales and operating revenues grew **6.1%** to **$7.55 billion**, with gross profit up **12.8%** and net earnings increasing **38.0%** Consolidated Earnings Summary | (In thousands) | Q1 FY2026 | Q1 FY2025 | | :--- | :--- | :--- | | **NET SALES AND OPERATING REVENUES** | **$7,546,541** | **$7,113,397** | | GROSS PROFIT | $893,623 | $791,895 | | CARMAX AUTO FINANCE INCOME | $141,650 | $146,970 | | Earnings before income taxes | $283,130 | $206,640 | | **NET EARNINGS** | **$210,381** | **$152,440** | | **Diluted NET EARNINGS PER SHARE** | **$1.38** | **$0.97** | [Consolidated Balance Sheets](index=12&type=section&id=CONSOLIDATED%20BALANCE%20SHEETS) Total assets were **$27.39 billion**, with **$637.9 million** in auto loans held for sale, and equity rose to **$6.29 billion** Consolidated Balance Sheet Summary | (In thousands) | May 31, 2025 | Feb 28, 2025 | | :--- | :--- | :--- | | **TOTAL ASSETS** | **$27,386,405** | **$27,404,206** | | Cash and cash equivalents | $262,819 | $246,960 | | Inventory | $3,624,353 | $3,934,622 | | Auto loans held for sale | $637,947 | $0 | | Auto loans held for investment, net | $16,802,744 | $17,242,789 | | **TOTAL LIABILITIES** | **$21,099,496** | **$21,161,218** | | **TOTAL SHAREHOLDERS' EQUITY** | **$6,286,909** | **$6,242,988** | [Consolidated Statements of Cash Flows](index=13&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) Operating activities generated **$299.5 million** in cash, investing used **$141.2 million**, and financing used **$129.4 million** for share repurchases Consolidated Cash Flow Summary | (In thousands) | Three Months Ended May 31, 2025 | | :--- | :--- | | NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES | $299,543 | | NET CASH USED IN INVESTING ACTIVITIES | ($141,189) | | NET CASH USED IN FINANCING ACTIVITIES | ($129,425) | | Increase in cash, cash equivalents, and restricted cash | $28,929 | - Key drivers of operating cash flow included net earnings of **$210.4M**, a **$310.3M decrease** in inventory, and a **$338.3M net change** in auto loans held for investment, partially offset by **$637.9M** reclassified to auto loans held for sale[43](index=43&type=chunk) - Financing activities were dominated by the repurchase and retirement of common stock for **$204.0 million** and net payments on non-recourse notes payable[43](index=43&type=chunk) [Forward-Looking Statements and Risk Factors](index=8&type=section&id=Forward-Looking%20Statements) This section outlines forward-looking statements and key risk factors, including competitive changes and economic conditions - The company warns that statements about future plans, sales, margins, and earnings are forward-looking and subject to risks and uncertainties[34](index=34&type=chunk) - Key risk factors cited include: competitive changes, economic conditions, capital availability, vehicle price volatility, inventory sourcing, credit losses in the CAF portfolio, and failure to realize benefits from omni-channel or AI initiatives[36](index=36&type=chunk)

Core Viewpoint - Recent data from CarMax KMX Auto Finance indicates a rise in loan delinquencies and net losses, raising concerns about credit quality in the used auto lender's portfolio [1][4]. Summary by Sections Loan Performance - After two months of stability, loan delinquency and loss rates have worsened, with May showing a sharper increase than typical seasonal trends [2][3]. - The portfolio-level delinquency rate increased by 36 basis points sequentially, exceeding the historical seasonal average of 18 basis points [7]. - Year-over-year, the portfolio-level delinquency rate rose by 16 basis points, contrasting with a trailing three-month trend of a decrease of 2 basis points [8]. Credit Quality Concerns - The cumulative net loss rate increased by 52 basis points year-over-year, consistent with a trailing three-month trend of 48 basis points [8]. - Newer securitizations are not performing better than older vintages, with the delinquency rate for the most recent prime securitization trending higher than older vintages [5][4]. Analyst Insights - Analyst Scott Devitt maintains an Outperform rating on CarMax with a price target of $90, despite the concerns raised by the recent data [1]. - Devitt projects first-quarter revenue of $7.67 billion and earnings per share of $1.23 [10]. - The company is expected to face increased loan loss provisions as it targets lower-tier borrowers to maintain interest margins [6][4]. Market Dynamics - Despite the challenges, the used auto market remains healthy, supported by strong gross profit margins for scaled retailers [9][10]. - CarMax has sustained robust sourcing methods and integrated credit capabilities, which have helped maintain performance amid macroeconomic uncertainties [10].

Financial Performance - CarMax is set to release its first-quarter financial results on June 20, with analysts expecting earnings of $1.17 per share, an increase from $0.97 per share in the same period last year [1] - The company projects quarterly revenue of $7.53 billion, compared to $7.11 billion a year earlier [1] - CarMax reported weaker-than-expected earnings for the fourth quarter on April 10 [1] Stock Performance - CarMax shares fell by 2.2%, closing at $64.43 on Tuesday [2] Analyst Ratings - Wedbush analyst Scott Devitt reiterated an Outperform rating with a price target of $90 [4] - RBC Capital analyst Steven Shemesh maintained an Outperform rating but reduced the price target from $103 to $80 [4] - JP Morgan analyst Rajat Gupta maintained an Underweight rating and lowered the price target from $72 to $65 [4] - Truist Securities analyst Scot Ciccarelli maintained a Hold rating and increased the price target from $72 to $88 [4] - Oppenheimer analyst Brian Nagel maintained an Outperform rating with a price target of $105 [4]

Core Viewpoint - CarMax (KMX) is expected to report quarterly earnings of $1.22 per share, a 25.8% increase year-over-year, with revenues projected at $7.56 billion, reflecting a 6.3% year-over-year growth [1]. Earnings Estimates - The consensus EPS estimate for the quarter has been revised upward by 0.9% over the past 30 days, indicating analysts' reassessment of their projections [2]. - Revisions to earnings projections are crucial for predicting investor behavior and are linked to short-term stock price performance [3]. Revenue and Sales Projections - Analysts estimate 'Net sales - Wholesale vehicles' to reach $1.31 billion, a 4.7% increase from the prior year [5]. - 'Net sales - Other' is projected at $189.91 million, indicating a 5.8% year-over-year change [5]. - 'Net sales - Used vehicles' is expected to be $6.05 billion, reflecting a 6.6% increase year-over-year [5]. - The consensus for 'Other sales and revenues - Extended protection plan revenues' stands at $129.56 million, a 9.1% increase from the previous year [6]. Store and Unit Sales Estimates - Analysts project a total of 251 stores, up from 245 in the same quarter last year [6]. - 'Unit sales - Total vehicles' are expected to reach 378,575, compared to 358,817 a year ago [9]. - 'Unit sales - Used vehicles' is estimated at 224,745, up from 211,132 in the previous year [9]. Profitability Metrics - 'Revenue per vehicle retailed (ASP) - Used vehicles' is forecasted to be $26.84 thousand, compared to $26.53 thousand last year [7]. - 'Gross Profit per Unit - Used vehicles gross profit' is expected to be $2,384.83, up from $2,347 last year [7]. - 'Gross Profit per Unit - Wholesale vehicles gross profit' is projected at $1,070.91, compared to $1,064 last year [8]. - 'Revenue per vehicle retailed (ASP) - Wholesale vehicles' is expected to be $8.29 thousand, compared to $8.09 thousand last year [10]. Market Performance - CarMax shares have decreased by 3.5% over the past month, contrasting with the Zacks S&P 500 composite's increase of 1.7% [10]. - CarMax holds a Zacks Rank 3 (Hold), indicating it is expected to closely follow overall market performance in the near term [11].

Group 1 - CarMax is set to announce its Q1 FY'26 earnings on June 20th, with expected revenue of approximately $7.56 billion, reflecting a 6% year-over-year increase [2] - Adjusted earnings per share are anticipated to be around $1.19, compared to $0.97 in the same quarter last year [2] - The company has seen revenue growth driven by increased second-hand vehicle sales volume and expanded financing operations [2] Group 2 - CarMax's profitability has improved due to better cost management and digital innovations enhancing customer experience and operational efficiency [2] - The company has a market capitalization of $10 billion and reported a net income of $501 million over the past twelve months [2] - CarMax's total revenue for the last twelve months was $26 billion [2] Group 3 - Historical data shows that CarMax has had 20 recorded earnings data points over the last five years, with 8 positive and 12 negative one-day returns [4] - Positive one-day returns occurred about 40% of the time, increasing to 58% when considering the last three years [4] - The median of the positive returns is 5.9%, while the median of the negative returns is -9.4% [4]

Company Overview - CarMax is the largest retailer of used vehicles in the United States, headquartered in Richmond, VA [11] - In fiscal 2025, CarMax retailed 790,000 used vehicles and sold 540,000 vehicles through wholesale auctions [11] Financial Metrics - CarMax has a Zacks Rank of 3 (Hold) and a VGM Score of A, indicating a solid performance [11] - The company has a Value Style Score of B, supported by a forward P/E ratio of 17.4, which is attractive for value investors [12] - The Zacks Consensus Estimate for CarMax's earnings for fiscal 2026 has increased by $0 to $3.78 per share, with two analysts revising their earnings estimates higher in the last 60 days [12] - CarMax has an average earnings surprise of 6.9%, suggesting it has a history of exceeding earnings expectations [12] Investment Considerations - With a solid Zacks Rank and top-tier Value and VGM Style Scores, CarMax is recommended for investors' consideration [12]