CarMax(KMX) - 2026 Q1 - Quarterly Results

First Quarter Highlights 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] - 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] CEO Commentary 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] - 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] Business Performance Review Q1 performance showed broad growth: combined unit sales up 5.8%, retail sales up 9.0%, and gross profit surging 12.8% Sales Performance 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] Gross Profit Performance 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 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] CarMax Auto Finance (CAF) 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][12] - 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] - 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] - CAF's net financing penetration decreased to 41.8% from 43.3% in the prior year's first quarter[14] Corporate Activities 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] - As of May 31, 2025, $1.74 billion remained available for repurchase under the current authorization[15] - Two new stand-alone reconditioning/auction centers were opened in El Mirage, Arizona and Midlothian, Texas[16] Supplemental Financial Information 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 This section presents unaudited consolidated financial statements, detailing CarMax's financial position and performance Consolidated Statements of Earnings 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 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 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] - 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] Forward-Looking Statements and Risk Factors 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] - 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]