CarMax(US:KMX)2025-12-23 15:02Financial Performance - CarMax reported net sales and operating revenues of $5,793.9 million for the third quarter of fiscal 2026, a decrease of 6.9% compared to the same period in fiscal 2025[128]. - Gross profit for the third quarter was $590.0 million, down 12.9% year-over-year, while net earnings fell to $62.2 million, a decline of 50.4%[128]. - Used vehicle unit sales decreased by 8.0% to 169,557 units in the third quarter, with a comparable store sales decline of 9.0%[128]. - Used vehicle sales decreased by 7.0% to $4,548.2 million for the three months ended November 30, 2025, compared to $4,888.9 million in the same period of 2024[144]. - Total net sales and operating revenues fell by 6.9% to $5,793.9 million for the three months ended November 30, 2025, down from $6,223.4 million in 2024[144]. - Used vehicle unit sales declined by 8.0% to 169,557 units for the three months ended November 30, 2025, compared to 184,243 units in 2024[145]. - Gross profit for used vehicles decreased by 10.8% to $378.9 million for the three months ended November 30, 2025, compared to $424.8 million in 2024[158]. - Other sales and revenues decreased by 9.2% to $150.6 million for the three months ended November 30, 2025, down from $165.9 million in 2024[144]. - Wholesale vehicle revenues decreased by 6.3% to $114.8 million for the three months ended November 30, 2025, compared to $138.1 million in 2024[154]. Strategic Initiatives - The company aims to reduce SG&A expenses by at least $150 million by the end of fiscal 2027, with an initial step involving a 30% reduction in the Customer Experience Centers workforce, expected to save approximately $35 million annually[137]. - CarMax plans to enhance profitability through new product offerings, including the redesigned MaxCare plan and the new MaxCare Plus plan, with a nationwide rollout expected in the first quarter of fiscal 2027[136]. - The company opened five new stores and three stand-alone reconditioning/auction centers in the first nine months of fiscal 2026, expanding its footprint to 255 used car stores across 110 U.S. television markets[141]. - The company plans to open one additional store and one additional stand-alone reconditioning/auction center for the remainder of fiscal 2026[186]. Market Position and Competition - CarMax's average selling prices have increased, prompting a strategy to lower margins and increase marketing spend to remain competitive[135]. - CarMax's market share for age 0- to 10-year-old vehicles sold nationwide was approximately 3.7% in calendar 2024, consistent with the previous year, but is expected to decrease for the full calendar year due to sales pressures[140]. Auto Financing - CarMax Auto Finance (CAF) financed 42.3% of retail used vehicle unit sales in the first nine months of fiscal 2026, with a portfolio of $16.53 billion servicing approximately 1.0 million customer accounts[123]. - CAF income for Q3 FY2026 was $174.7 million, an increase from $159.9 million in Q3 FY2025[183]. - The average auto loans outstanding for Q3 FY2026 was $16,805.2 million, compared to $17,771.7 million in Q3 FY2025[183]. - The company expects to receive approximately $40 million to $45 million in additional CAF income related to servicing fees from a recent securitization transaction[178]. - The company aims to increase CAF penetration to 50%, with each additional percentage point expected to generate $10 million to $12 million in lifetime pre-tax income per year of origination[180]. - Net auto loans originated in the three months ended November 30, 2025, were $1,761.4 million, a decrease from $1,942.8 million in the same period of 2024[184]. - The net penetration rate for auto loans was 42.6% for the three months ended November 30, 2025, compared to 43.1% for the same period in 2024[184]. Inventory and Capital Management - As of November 30, 2025, total inventory was $3.13 billion, a decrease of $806.7 million compared to the start of the fiscal year[191]. - Net cash provided by operating activities totaled $2.34 billion for the first nine months of fiscal 2026, compared to $478.1 million in the prior year period[190]. - Capital expenditures for fiscal 2026 are estimated to total approximately $575 million, up from $467.9 million in fiscal 2025[186]. - Net payments on non-recourse notes payable were $1.15 billion in the first nine months of fiscal 2026, compared to net issuances of $229.3 million in the prior year period[197]. - As of November 30, 2025, the company had $12.94 billion and $3.03 billion of non-recourse notes payable outstanding related to asset-backed term funding transactions and warehouse facilities, respectively[204]. - The company had $3.32 billion of unused capacity in its warehouse facilities as of November 30, 2025[204]. - A total of $2 billion of board authorizations for share repurchases was outstanding as of November 30, 2025, with $1.36 billion remaining available for repurchase[207]. Risk Factors - The company cautioned that various factors, including changes in economic conditions and competitive landscape, could materially affect future results and expectations[209]. - There have been no material changes to the company's market risk since February 28, 2025[211]. - The company highlighted the importance of successfully managing growth and retaining key associates as critical to its future performance[212]. - The company emphasized the potential impact of credit losses on its auto loan portfolio due to changes in economic conditions[212]. - The company noted the risks associated with its strategic investments and the performance of third-party vendors[212]. - The company acknowledged the potential volatility in the market price for its common stock as a risk factor[212].