Does CarMax (KMX) Still Have Pandemic Strain?

Core Insights - Vulcan Value Partners reported positive absolute performance across all strategies in Q3 2025, with the All-Cap Composite leading at 5.5% net return [1] - The investor letter highlighted CarMax, Inc. as a significant detractor to performance, with a one-month return of -25.97% and a 52-week loss of 40.87% [2][3] Company Performance - CarMax, Inc. is the largest used car retailer in the U.S. and has the third largest wholesale business [3] - The company experienced a 5% decline in retail volumes during Q2 2025, attributed to volatility in used car prices and demand shifts due to tariff announcements [3] - Year-to-date, CarMax's volumes and profits are up year over year, indicating potential for recovery [3] Market Outlook - Despite short-term challenges, CarMax is viewed as a strong business with favorable long-term prospects due to its competitive advantages such as customer experience, brand strength, scale, vertical integration, and omnichannel approach [3] - The company is currently under earning but is well-positioned to grow volumes and increase earnings as the market normalizes [3] - CarMax maintains a solid balance sheet, generates significant free cash flow, and is actively buying back shares, indicating confidence in its value [3]