Core Insights - CarMax's stock surged by over 15.3% following its latest quarterly earnings release, indicating strong investor interest amid market divergences between used and new cars [1] - The automotive market is experiencing a shift, with used vehicle sales increasing by 5.1% while wholesale vehicle sales to dealerships declined by 0.3% [5] - CarMax's management has effectively navigated the challenging market conditions, reporting a 13.3% increase in earnings per share (EPS) despite negative industry trends [8] Financial Performance - CarMax's operating cash flows improved significantly, moving from a net outflow of $61.1 million last year to a net inflow of $501 million this year, primarily due to a $280 million decrease in inventory values [9] - The company increased its provision for loan losses to $112.6 million from $89.8 million year-over-year, reflecting worsening consumer financial conditions [7] Market Trends - The vehicle market is facing rising repossession rates, up by 23% over the year, driven by tightening financial conditions affecting consumers [5] - The personal savings rate has fallen to negative, indicating that discretionary spending may decline as consumers struggle with rising unemployment and inflation [4] Strategic Moves - CarMax has adopted a strategy of purchasing 61.4% more cars from discounted dealership inventory, positioning itself to mitigate potential losses [6] - The company allocated $106.1 million for stock buybacks, signaling management's confidence in the stock's undervaluation and potential for future price increases [10] Analyst Sentiment - Analysts at Wedbush have set a price target of $95 per share for CarMax, suggesting a potential upside of 22.1% from current trading levels [11] - Short interest in CarMax stock has decreased by over 5.8% in the past month, indicating a shift in sentiment among bearish traders [12]

Financial Performance - CarMax reported net sales and operating revenues of $7,013.5 million for the second quarter of fiscal 2025, a decrease of 0.9% compared to the same period in fiscal 2024[108]. - Gross profit for the second quarter was $760.5 million, reflecting a 9.1% increase year-over-year[108]. - For the first six months of fiscal 2025, total net sales and operating revenues decreased by 4.3% to $14,126.9 million compared to $14,760.9 million in the prior year[122]. - In the second quarter of fiscal 2025, used vehicle sales increased by 1.5% to $5,677.1 million, while wholesale vehicle sales decreased by 12.7% to $1,154.5 million[122]. - Other sales and revenues increased by 13.2% in the second quarter of fiscal 2025, driven by a 19.3% increase in extended protection plan revenues[135]. Vehicle Sales and Inventory - Used vehicle unit sales reached 211,020 in the second quarter, a 5.1% increase from the prior year[108]. - The company purchased approximately 300,000 vehicles in the second quarter, up 2.9% year-over-year, with over 70% self-sufficiency rate[116]. - Used vehicle unit sales increased by 5.1% in the second quarter of fiscal 2025, totaling 211,020 units sold[123]. - Average selling prices for used vehicles decreased by 4.6% to $26,245 in the second quarter of fiscal 2025, reflecting lower vehicle acquisition costs[125]. - Total inventory as of August 31, 2024, was $3.40 billion, a decrease of $280.3 million from the start of the fiscal year[168]. CarMax Auto Finance (CAF) - CarMax Auto Finance (CAF) income decreased by 14.4% to $115.6 million in the second quarter, with CAF financing 42.6% of retail used vehicle unit sales[104]. - The provision for loan losses was $112.6 million in Q2 of fiscal 2025, reflecting an increase of $52.2 million in lifetime loss estimates, nearly an 11% rise in loss expectations[161]. - The net penetration rate for CAF was 42.0% in Q2 of fiscal 2025, down from 42.8% in the prior year[158]. - CAF's managed portfolio aims for cumulative net losses in the 2% to 2.5% range over the life of the loans[150]. - CAF has expanded its asset-backed securitization program to include higher prime and non-prime issuances, enhancing funding capacity[153]. Store Expansion and Operations - The company opened two new stores and a standalone reconditioning center in Richland, Mississippi, with plans to open three additional stores and one auction facility by the end of the fiscal year[120]. - As of August 31, 2024, the company operated used car stores in 109 U.S. television markets, covering approximately 85% of the U.S. population[119]. - The company ended the second quarter of fiscal 2025 with 247 used car stores, an increase from 241 stores at the end of the same period in the previous year[130]. - The company maintains a multi-year pipeline of sites to support store and capacity growth, with 164 of 247 used car stores located on owned sites[171]. Cost Management and Efficiency - CarMax aims to achieve a mid-70% range for SG&A as a percentage of gross profit on an annual basis, requiring low-single-digit gross profit growth[117]. - The company is focused on enhancing logistics efficiency, expecting to drive savings of approximately $200 per retail unit over the next one to two years[115]. - SG&A expenses increased by $24.9 million, or 4.2%, in Q3 2025, primarily due to a $15.6 million rise in compensation and benefits[146]. Debt and Cash Flow - Total debt as of August 31, 2024, was $18.71 billion, with cash and cash equivalents at $524.67 million[173]. - Net cash used in investing activities totaled $215.5 million, slightly up from $211.8 million in fiscal 2024, with capital expenditures of $213.1 million compared to $210.2 million in the prior year[171]. - Net cash used in financing activities was $283.1 million, a decrease from net cash provided of $547.0 million in the prior year, influenced by net payments on long-term debt of $306.3 million and stock repurchases of $213.3 million[172]. Market Outlook and Risks - The company cautions that various factors, including changes in economic conditions and competitive landscape, could materially affect future results[181]. - There have been no material changes to market risk since February 29, 2024[183].

Group 1 - The article discusses the author's previous stance on CarMax, Inc. (NYSE: KMX), indicating a lack of competitive advantages and suggesting it is not a long-term investment opportunity [1] - The focus is on identifying companies with exceptional quality and a proven ability to reinvest capital for impressive returns, particularly those with a market capitalization of less than $10 billion [1] - The ideal companies should demonstrate a long-term capability of capital compounding with a high compound annual growth rate, potentially delivering tenfold returns or greater [1] Group 2 - The investment strategy is primarily conservative, with occasional pursuits of opportunities that present a favorable risk-reward ratio, ensuring substantial upside with limited downside [1] - The approach emphasizes maintaining a long-term perspective to generate higher returns compared to market indices, especially in a rapidly evolving investment landscape [1] - The author holds a Bachelor's degree in finance and accounting, indicating a foundation in financial analysis [1]

As CarMax adapts to a shifting automotive landscape, the company is focused on improving the customer experience to maintain its leadership as the nation's largest used car dealer. Despite a 12.7% decrease in wholesale sales (where vehicles are auctioned off to auto dealers), CarMax on Thursday (Sept. 26) reported a 2.9% increase in overall vehicle sales for the second quarter ending Aug. 31. CEO Bill Nash emphasized the company's priority on creating a seamless, omnichannel shopping experience is vital to ...

CarMax Inc. (KMX) reported second-quarter fiscal 2025 (ended Aug. 31, 2024) adjusted earnings per share of 85 cents, which missed the Zacks Consensus Estimate of 86 cents. The bottom line, however, rose from 75 cents per share recorded in the year-ago period. The auto retailer registered revenues of $7 billion in the quarter under review, which beat the Zacks Consensus Estimate of $6.85 billion. The top line, however, contracted 0.9% year over year. Segmental Performance CarMax's used-vehicle net sales tota ...

About this content About Emily Jarvie Emily began her career as a political journalist for Australian Community Media in Hobart, Tasmania. After she relocated to Toronto, Canada, she reported on business, legal, and scientific developments in the emerging psychedelics sector before joining Proactive in 2022. She brings a strong journalism background with her work featured in newspapers, magazines, and digital publications across Australia, Europe, and North America, including The Examiner, The Advocate, The ...

Core Insights - CarMax reported an increase in retail unit sales in Q2, with earnings and revenue exceeding estimates [1][2] - Comparable store unit sales rose by 4.3% year-over-year [1][3] - CEO Bill Nash highlighted the positive results despite facing "auto loan loss pressure" in the industry [1][4] Financial Performance - Fiscal 2025 Q2 earnings per share (EPS) were $0.85, surpassing analyst estimates by $0.02 [2] - Revenue decreased by 0.9% year-over-year to $7.01 billion, but still exceeded forecasts [2] Sales Metrics - Retail used unit sales increased by 5.1% to 211,020 units, while wholesale vehicle sales declined by 0.3% to 141,458 units [3] - Gross profit per retail unit was $2,269, and $975 per wholesale unit, consistent with the previous year's Q2 [3] - The company purchased 300,000 vehicles during the period, a 2.9% increase, driven by a 61.4% rise in dealer purchases, while consumer purchases fell by 1.2% [3] Market Reaction - CarMax shares rose approximately 6% in late-morning trading, moving into positive territory for 2024 [4]

Financial Data and Key Metrics - Total sales for Q2 FY25 were $7 billion, down 1% YoY, driven by lower retail and wholesale prices, partially offset by higher retail volume [5] - Retail unit sales increased 5.1% YoY, with used unit comps up 4.3% [5] - Average selling price (ASP) declined by $1,250 per unit or 5% YoY [5] - Retail gross profit per used unit was $2,269, consistent with $2,251 in the prior year [6] - Wholesale gross profit per unit was $975, in line with $963 a year ago [6] - CarMax Auto Finance (CAF) income was $116 million, down 14% YoY, impacted by industry-wide loan loss pressures [7] - Net earnings per diluted share were $0.85, up 13% YoY [8] - Total gross profit was $760 million, up 9% YoY [8] Business Line Performance - Retail business saw a 5.1% increase in total unit sales, with used unit comps up 4.3% [5] - Wholesale business purchased approximately 300,000 vehicles, up 3% YoY, with 269,000 from consumers and 31,000 from dealers [6] - Online retail unit sales accounted for 15% of total retail unit sales, up from 14% last year [7] - Omni-sales accounted for 57% of retail unit sales, up from 55% in the prior year [7] - CAF originated approximately $2.2 billion in loans, with a sales penetration of 42% [12] Market Performance - Retail unit sales improved sequentially from an 8.3% decline in Q1 to a 0.3% decline in Q2 [6] - Online transactions accounted for 29% of total revenue, slightly down from last year due to lower wholesale pricing [7] - Wholesale auctions and sales were 100% virtual, representing 17% of total revenue [7] Strategy and Industry Competition - The company is testing a new full spectrum underwriting model to expand its lending capabilities [5][16] - CAF successfully executed its first non-prime ABS transaction and a higher prime ABS deal, enhancing funding capacity [16] - The company is focusing on driving down the cost of goods sold through logistics and reconditioning efficiencies [20] - CarMax launched an EV Hub on its website to address consumer questions about electric vehicles [20] Management Commentary on Operating Environment and Future Outlook - Management noted industry-wide auto loan loss pressures but remains optimistic about future sales and earnings growth [4][21] - The company expects continued year-over-year improvement in service margins, driven by efficiency measures and sales growth [9] - Management highlighted the importance of the omnichannel experience and digital tools in driving customer satisfaction and operational efficiency [19][20] Other Important Information - The company repurchased 1.4 million shares for $106 million during the quarter, with $2.15 billion remaining in the repurchase authorization [11] - SG&A expenses increased by 4% YoY to $611 million, primarily due to higher compensation and occupancy costs [9] - The company expects to incur less than $10 million in charges related to logistics optimization, which will be offset by long-term efficiencies [10] Q&A Session Summary Question: Update on unit comps and market view [22] - Unit comps are trending positive for Q3, in line with Q2, but slightly softer due to fewer weekend days in September [22] - Management is cautious about credit headwinds but remains committed to full spectrum lending, with Tier 2 and Tier 3 testing underway [23][24] Question: CAF profitability and loan loss provisions [28] - CAF profitability is impacted by higher loan losses, but management expects funding cost reductions to provide a tailwind [29] - The $52 million provision adjustment for existing loans was outsized compared to previous quarters, but management believes the reserve adequately captures future losses [31] Question: Credit trends and underwriting adjustments [32] - Management tightened underwriting in April 2024 and is monitoring portfolio performance closely, with no further tightening expected in the near term [33][36] Question: Vehicle sourcing and dealer relationships [37] - The company sourced 31,000 vehicles from dealers, up 60% YoY, driven by the Edmunds sales team and increased dealer participation [38] Question: Improving used car unit comps and loan loss provisions [41] - Retail unit comps improved due to internal efficiencies, declining prices, and a stable pricing environment [42][43] - The higher loan loss provision reflects both portfolio performance and broader industry trends [44] Question: September comps and advertising spend [46] - September comps are tracking positive for the quarter, with advertising spend in line with annual targets despite quarterly variations [46][49] Question: Credit environment and Tier 3 penetration [50] - Tier 3 penetration is down to 7%, primarily due to affordability challenges rather than underwriting tightening [51] Question: Digital progression tools and conversion rates [52] - The new order processing system has been rolled out nationwide, improving the customer and associate experience, though early conversion rate impacts are still being assessed [53] Question: Online sales and unit profitability [55] - Online sales accounted for 15% of total retail unit sales, with omni-sales up to 57% [55] - The company is more efficient in its omni-selling model compared to pre-omni metrics [56] Question: Wholesale market and GPU trends [72] - The company maintains strong self-sufficiency in vehicle sourcing, with over 70% of vehicles bought through appraisal lanes and dealers, helping to manage margins [73] Question: Credit penetration and third-party financing [75] - CAF aims to be a full spectrum lender, with current penetration at 42%, and expects to grow penetration over time while maintaining a diverse lender base [75][76] Question: Reconditioning and logistics efficiency [82] - The company is focused on improving reconditioning efficiency through various initiatives, including better part utilization and capacity management [83] Question: Advertising expense and comps [85] - Advertising expense was down YoY due to timing, with full-year spending expected to align with targets [85] Question: Other financing channel and capital allocation [88] - The other financing channel primarily serves rate-sensitive, higher-end consumers, many of whom pay in cash [88] - Share repurchases are expected to continue at the current pace [89]

CarMax (KMX) reported $7.01 billion in revenue for the quarter ended August 2024, representing a year-overyear decline of 0.9%. EPS of $0.85 for the same period compares to $0.75 a year ago. The reported revenue compares to the Zacks Consensus Estimate of $6.85 billion, representing a surprise of +2.38%. The company delivered an EPS surprise of -1.16%, with the consensus EPS estimate being $0.86. While investors scrutinize revenue and earnings changes year-over-year and how they compare with Wall Street exp ...

Core Insights - CarMax reported quarterly earnings of $0.85 per share, missing the Zacks Consensus Estimate of $0.86 per share, but showing an increase from $0.75 per share a year ago, resulting in an earnings surprise of -1.16% [1] - The company posted revenues of $7.01 billion for the quarter ended August 2024, surpassing the Zacks Consensus Estimate by 2.38%, although this represents a decline from year-ago revenues of $7.07 billion [2] - CarMax shares have underperformed the market, losing about 2.9% since the beginning of the year compared to the S&P 500's gain of 20% [3] Earnings Outlook - The earnings outlook for CarMax is mixed, with the current consensus EPS estimate for the coming quarter at $0.61 on $6 billion in revenues, and $3 on $25.73 billion in revenues for the current fiscal year [7] - The company's Zacks Rank is currently 3 (Hold), indicating that shares are expected to perform in line with the market in the near future [6] Industry Context - The Automotive - Retail and Wholesale - Parts industry, to which CarMax belongs, is currently in the bottom 12% of the Zacks industry rankings, suggesting potential challenges ahead [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which could impact CarMax's stock performance [5]