CarMax Reports Record Q1 Earnings Growth

Core Insights - CarMax reported a 6% year-over-year increase in total sales to $7.5 billion for Q1 FY2026, with used unit comps rising by 8.1% and a record diluted EPS of $1.38, reflecting a 42% year-over-year growth [1] Funding Strategy and Risk Mitigation - CarMax Auto Finance (CAF) originated over $2.3 billion in loans with a 41.8% penetration rate, earmarking a $632 million principal balance of non-prime receivables for off-balance sheet sale, marking the company's first such move [3][4] - Total loan loss provisions increased to $102 million, resulting in a reserve balance of $474 million, or 2.76% of managed receivables excluding loans held for sale [3] Operational Advancements and Margin Expansion - Digital engagement accounted for 80% of retail sales in Q1 FY2026, with SG&A expenses growing only 3% despite a 9% increase in retail unit sales, achieving "omnicost neutrality" on three key efficiency metrics [5][6] - The deployment of AI technology, including the Sky AI virtual assistant, led to a 30% year-over-year improvement in customer self-service containment and a 24% increase in consultant productivity [7][9] Future Outlook - Management anticipates continued positive retail unit comp growth and market share gains for the remainder of FY2026, with service margins expected to remain positive [10]