Financial Performance - CarMax's sales and profits plunged in the latest quarter [1] Industry Trends - The tariff-strained auto industry sends up another warning sign about the U S economy [1]

Core Insights - CarMax Inc (NYSE:KMX) shares have dropped 22.2%, trading at $44.37 after missing fiscal second-quarter expectations, reporting earnings of $0.64 on revenue of $6.59 billion, with declines in wholesale and used vehicle segments [1] - The stock is on track to extend its losing streak to five sessions, marking one of its steepest losses since 2022, trading at five-year lows and below the $50 level for the first time in that period, having already lost 45.8% in 2025 [2] Market Sentiment - At the International Securities (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), KMX's 50-day call/put ratio of 2.63 is in the 80th percentile of the last year, indicating a potential unwinding of optimism in the options market that could create additional headwinds for the equity [3] - CarMax stock is experiencing increased bearish attention, with 21,000 puts placed today, which is 24 times the usual intraday amount, with the October 40 put being the most popular contract [4]

Welcome to Yahoo Finance's flagship show, The Morning Brief. I'm Julie Hyman. Let's get to the three things you need to know today.First up, US stock futures falling for a third day as the record-breaking rally in stocks cools. However, there is some good news on the economic front. The latest read of second quarter GDP showed the US economy grew at the fastest pace in nearly 2 years.Inflation adjusted GDP, which measures the value of goods and services produced, increased at a revised 3.8% annualized rate. ...

Shares in CarMax dropped as much as 24% in morning trading. Analysts had projected higher profits and stable sales, but the company missed on both fronts. ...

Core Insights - CarMax reported $6.59 billion in revenue for the quarter ended August 2025, a year-over-year decline of 6% and an EPS of $0.64 compared to $0.85 a year ago, missing the Zacks Consensus Estimate of $7.05 billion by 6.52% [1] - The company experienced a significant EPS surprise of -37.86%, with the consensus EPS estimate being $1.03 [1] Financial Performance Metrics - Comparable Store Used Vehicles Sales decreased by 7.1%, contrasting with the 1.5% average estimate from six analysts [4] - Total number of stores stood at 250, slightly below the five-analyst average estimate of 252 [4] - Average Selling Prices for used vehicles were reported at $25.99 thousand, lower than the $26.29 thousand estimated by five analysts [4] - Gross Profit per Unit for used vehicles was $2,216.00, compared to the $2,294.14 average estimate [4] - Gross Profit per Unit for wholesale vehicles was $993.00, exceeding the five-analyst average estimate of $957.55 [4] - Net sales and operating revenues for wholesale vehicles were $1.15 billion, slightly below the eight-analyst average estimate of $1.16 billion, representing a year-over-year change of -0.4% [4] - Net sales and operating revenues for used vehicles were $5.27 billion, compared to the $5.78 billion estimated by eight analysts, reflecting a -7.2% change year-over-year [4] - Other sales and revenues from third-party finance fees were reported at -$0.8 million, significantly lower than the $0.16 million estimated by six analysts, marking a -157.1% change year-over-year [4] - Extended protection plan revenues were $115.1 million, below the six-analyst average estimate of $126.26 million, representing a -5.2% change year-over-year [4] - Other sales and revenues from advertising & subscription were $37.9 million, exceeding the $34.85 million average estimate, showing a +10.5% change year-over-year [4] Stock Performance - CarMax shares have returned -8.1% over the past month, while the Zacks S&P 500 composite has increased by +2.7% [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating potential performance in line with the broader market in the near term [3]

Financial Data and Key Metrics Changes - The second quarter net earnings per diluted share was $0.64, down from $0.85 a year ago, primarily driven by lower volume and a CarMax Auto Finance (CAF) loss provision adjustment [17][18] - Total gross profit was $718 million, a decrease of 6% from the previous year's second quarter [18] - Retail gross profit per used unit was $2,216, consistent with historical averages, while wholesale gross profit per unit was $993, showing a slight decrease [18][19] Business Line Data and Key Metrics Changes - Total sales for the quarter were $6.6 billion, down 6% year-over-year, with retail unit sales declining by 5.4% and used unit comps down 6.3% [8][9] - Wholesale unit sales decreased by 2.2% compared to the second quarter last year, but the average wholesale selling price increased by approximately $125 per unit to $7,900 [9][10] - CarMax Auto Finance originated over $2 billion, resulting in a sales penetration of 42.6%, which was 60 basis points above last year [13] Market Data and Key Metrics Changes - The average selling price of used vehicles was $26,000, reflecting a year-over-year decrease of approximately $250 per unit [9] - The company noted a pullback in demand from mid to high FICO customers, indicating a potential strain on consumer sentiment [75][94] Company Strategy and Development Direction - The company is focused on driving sales, gaining market share, and delivering significant year-over-year earnings growth, with key priorities including price competitiveness, consumer awareness, and SG&A reductions of at least $150 million over the next 18 months [5][7][11] - The "Wanna Drive?" brand campaign aims to enhance the omnichannel customer experience and increase brand awareness [10][11] - The company plans to continue investing in technology and operational efficiencies to support its growth objectives while maintaining a disciplined approach to pricing [20][21] Management's Comments on Operating Environment and Future Outlook - Management acknowledged that the second quarter results fell short of expectations but expressed confidence in the strategy and earnings model, projecting high teens EPS growth with mid-single-digit retail unit growth [5][21] - The management highlighted that while the consumer environment remains aggressive, they are positioned well to gain market share and improve sales performance in the upcoming quarters [75][76] Other Important Information - The company repurchased approximately 2.9 million shares for a total expenditure of $180 million during the second quarter, with $1.56 billion remaining in the repurchase authorization [22] - The deployment of AI technology, such as the Sky virtual assistant, has led to significant improvements in operational efficiency and customer experience [19][20] Q&A Session Summary Question: Impact of pull forward demand on used unit sales - Management indicated that both inventory depreciation and pull forward demand were significant factors affecting sales, with September showing stronger performance compared to the second quarter [27][28] Question: Pricing strategy and market competitiveness - Management confirmed a renewed focus on competitive pricing, acknowledging that they were less competitive in the previous quarter but are now in a better position [31][32] Question: Update on CarMax Auto Finance income expectations - Management revised expectations for CAF income to be flat to slightly down year-over-year due to a larger provision impact this quarter [38][39] Question: Areas of cost reduction in SG&A - Management emphasized that cost reductions would not impact growth strategy and would be reinvested into areas that drive sales, such as marketing [43][48] Question: Consumer sentiment and market conditions - Management noted that mid to high FICO customers are currently more cautious, impacting app volume and sales, but they remain committed to gaining market share [75][94] Question: Reserved inventory policy and its effects on sales - Management clarified that reserved inventory is beneficial for customer interest but acknowledged the need to manage how long a vehicle can be held in reserve [99][100]

Financial Data and Key Metrics Changes - The second quarter net earnings per diluted share was $0.64, down from $0.85 a year ago, primarily due to lower volume and a CAF loss provision adjustment [17][22] - Total gross profit was $718 million, a decrease of 6% from the previous year's second quarter [17] - SG&A expenses for the second quarter were $601 million, down 2% from the prior year, driven primarily by lower stock-based compensation [18][20] Business Line Data and Key Metrics Changes - Total sales for the quarter were $6.6 billion, down 6% compared to last year, reflecting lower volume [8] - Retail unit sales declined by 5.4%, with used unit comps down 6.3% [8] - Wholesale unit sales decreased by 2.2% year-over-year, while average wholesale selling price increased by approximately $125 per unit to $7,900 [9] Market Data and Key Metrics Changes - The average selling price for used vehicles was $26,000, a year-over-year decrease of approximately $250 per unit [9] - The retail gross profit per used unit was $2,216, in line with historical averages [18] - The weighted average contract rate charged to new customers was 11.2%, down from 11.4% in the previous quarter [13] Company Strategy and Development Direction - The company is focused on driving sales, gaining market share, and delivering significant year-over-year earnings growth [5] - Key priorities include maintaining competitive prices, enhancing consumer awareness of their differentiated experience, and delivering SG&A reductions of at least $150 million over the next 18 months [6][7] - The launch of the "Wanna Drive" brand campaign aims to highlight the company's unique omnichannel experience [10][11] Management's Comments on Operating Environment and Future Outlook - Management noted that while second quarter results fell short of expectations, they remain confident in their strategy and earnings model, which is expected to produce high EPS growth with mid-single-digit retail unit growth [5][21] - There is an expectation of increased marketing spend in the back half of the year to support the new brand positioning [21] - Management acknowledged that consumer sentiment is currently low, particularly among mid to high FICO customers, which may impact sales [72] Other Important Information - The company purchased approximately 293,000 vehicles during the quarter, down 2% from last year [9] - The net promoter score is the highest since the rollout of digital capabilities, indicating high customer satisfaction [10] - The company is committed to further reducing SG&A by leveraging technology and operational efficiencies [20] Q&A Session Summary Question: Impact of pull forward in demand on used unit sales - Management indicated that the most disruptive factor was the depreciation of inventory, which impacted pricing competitiveness and sales [27][28] Question: Pricing strategy and market competitiveness - Management acknowledged the need to be more competitive with pricing and emphasized the importance of being nimble in response to market conditions [31][32] Question: Update on CarMax Auto Finance (CAF) income expectations - Management revised expectations for CAF income to be flat to slightly down year-over-year due to a larger provision impact this quarter [37][38] Question: Areas of cost reduction in SG&A - Management clarified that cost reductions will not impact growth strategy and will be reinvested in areas that drive sales, such as marketing [42][46] Question: Consumer sentiment and market conditions - Management noted that consumers, especially those with mid to high FICO scores, are currently more cautious, impacting app volume and sales [72][73] Question: Reserved inventory policy and its effect on sales - Management explained that reserved inventory is beneficial for customer interest but acknowledged the need to manage how long a vehicle can be reserved [95][96]

Financial Data and Key Metrics Changes - The second quarter net earnings per diluted share was $0.64, down from $0.85 a year ago, primarily driven by lower volume and CarMax Auto Finance (CAF) loss provision adjustments [17][22] - Total gross profit was $718 million, a decrease of 6% from the previous year's second quarter [17] - Retail gross profit per used unit was $2,216, consistent with historical averages, while wholesale gross profit per unit was $993, showing a slight decrease [17][18] Business Line Data and Key Metrics Changes - Total sales for the quarter were $6.6 billion, down 6% year-over-year, with retail unit sales declining by 5.4% and used unit comps down 6.3% [8][9] - Wholesale unit sales decreased by 2.2% compared to the second quarter last year, while average wholesale selling price increased by approximately $125 per unit to $7,900 [9] - CAF originated over $2 billion in loans, resulting in a sales penetration of 42.6%, which was 60 basis points above last year [13] Market Data and Key Metrics Changes - The average selling price of used vehicles was $26,000, reflecting a year-over-year decrease of approximately $250 per unit [9] - The company noted a pullback in demand from mid to high FICO customers, indicating a potential strain on consumer sentiment [75][94] Company Strategy and Development Direction - The company is focused on driving sales, gaining market share, and delivering significant year-over-year earnings growth, with key priorities including price competitiveness, consumer awareness, and SG&A reductions of at least $150 million over the next 18 months [5][7][11] - The launch of the "Wanna Drive" brand campaign aims to enhance the omnichannel customer experience and drive sales [10][11] - The company plans to continue investing in technology and operational efficiencies to support its growth objectives while maintaining a disciplined approach to pricing [21][56] Management's Comments on Operating Environment and Future Outlook - Management acknowledged that the second quarter results fell short of expectations but expressed confidence in the strategy and earnings model, projecting high teens EPS growth with mid-single-digit retail unit growth [5][21] - The management highlighted the importance of being nimble in pricing strategies due to competitive pressures in the market [31][32] - There are concerns about consumer sentiment, particularly among mid to high FICO customers, which may impact sales moving forward [75][94] Other Important Information - The company is committed to reducing SG&A expenses while continuing to invest in initiatives that drive sales [20][47] - The CAF income for the quarter was $103 million, down $13 million from the previous fiscal year, with a loan loss provision of $142 million [13][15] Q&A Session Summary Question: Impact of pull forward in demand on used unit sales - Management indicated that both inventory depreciation and pull forward of demand contributed to the decline in used unit sales, with September showing stronger performance compared to the second quarter [27][28] Question: Pricing strategy and market competitiveness - Management confirmed a renewed focus on competitive pricing, acknowledging that they were less competitive in the previous quarter but are now in a better position [31][32] Question: Update on CAF income expectations - Management revised expectations for CAF income to be flat to slightly down year-over-year due to a larger provision impact this quarter [36][37] Question: SG&A cost reduction areas - Management emphasized that cost reductions would not impact growth strategy and would be reinvested in areas that drive sales, such as marketing [42][47] Question: Consumer sentiment and market conditions - Management noted that consumer sentiment is strained, particularly among mid to high FICO customers, which is affecting app volume and sales [75][94] Question: Reserved inventory policy - Management clarified that reserved inventory is beneficial for customer interest but acknowledged the need to manage how long a vehicle can be held in reserve [99][100]

Financial Data and Key Metrics Changes - The second quarter net earnings per diluted share was $0.64, down from $0.85 a year ago, primarily due to lower volume and CAF loss provision adjustments [16][19] - Total gross profit was $718 million, a decrease of 6% from the previous year [16] - SG&A expenses for the second quarter were $601 million, down 2% from the prior year, driven mainly by lower stock-based compensation [17][19] Business Line Data and Key Metrics Changes - Total sales for the quarter were $6.6 billion, down 6% year-over-year, reflecting lower volume [7] - Retail unit sales declined by 5.4%, with used unit comps down 6.3% [7] - Wholesale unit sales decreased by 2.2% compared to the second quarter last year, while average wholesale selling price increased by approximately $125 per unit to $7,900 [8] Market Data and Key Metrics Changes - The average selling price for used vehicles was $26,000, a year-over-year decrease of approximately $250 per unit [8] - The retail gross profit per used unit was $2,216, consistent with historical averages [16] - The weighted average contract rate charged to new customers by CarMax Auto Finance was 11.2%, down from 11.4% in the previous quarter [11] Company Strategy and Development Direction - The company aims to focus on driving sales, gaining market share, and delivering significant year-over-year earnings growth [4] - Key priorities include maintaining competitive prices, enhancing consumer awareness, delivering SG&A reductions of at least $150 million over the next 18 months, and generating additional profit through diversified business components [5][10] - The launch of the "Wanna Drive" brand campaign is part of a multiphase strategy to enhance the omnichannel experience [10] Management's Comments on Operating Environment and Future Outlook - Management acknowledged that the second quarter results fell short of expectations but expressed confidence in their strategy and earnings model [4] - The company noted that while there was a pull forward of demand into the first quarter, they have improved their inventory position and pricing competitiveness for the third quarter [6][7] - Management highlighted that consumer sentiment is currently strained, particularly among mid to high FICO customers, but they remain focused on gaining market share [62] Other Important Information - The company is committed to reducing SG&A expenses while continuing to invest in initiatives that support future growth [19] - CarMax Auto Finance originated over $2 billion during the second quarter, resulting in a sales penetration of 42.6% [11] - The company repurchased approximately 2.9 million shares for a total expenditure of $180 million during the second quarter [20] Q&A Session Summary Question: What factors contributed to the decline in used unit sales? - Management indicated that the most disruptive factors were inventory depreciation and a pull forward of demand into the first quarter, with September showing stronger performance than the second quarter [24][25] Question: Is CarMax seeing increased pricing competition in the market? - Management confirmed that they are always focused on competitive pricing and have recently improved their pricing position after experiencing depreciation [26][27] Question: What is the outlook for CarMax Auto Finance income? - Management expects CAF income to be flat to slightly down year-over-year due to a larger provision impact this quarter [30][31] Question: How will SG&A reductions impact growth strategy? - Management assured that SG&A reductions will not impact growth strategy, as investments in technology and marketing will continue to drive sales [38][39] Question: What is the company's approach to subprime lending? - Management clarified that they are not pushing into deep subprime but are cautiously expanding into the top half of Tier 2 lending [50][51] Question: How is the company addressing inventory management? - Management stated that they are actively monitoring reserved inventory and are considering adjustments to improve sales opportunities [78][79]

Core Insights - CarMax shares fell over 20% after missing quarterly earnings and revenue expectations, reporting earnings per share of 99 cents and revenue of approximately $6.6 billion, a 6% decline year-over-year [1][2] - The company's vehicle sales decreased by 4.1% compared to the same period last year, contributing to a 28% drop in net income to $95.4 million [2] - Other car retailers' shares also declined following CarMax's results, indicating the company's performance is viewed as a barometer for the industry [3] Financial Performance - Earnings per share: 99 cents, below the expected 1.05 [1] - Revenue: Approximately $6.6 billion, down 6% from the previous year, while analysts expected $7.01 billion [1] - Net income: $95.4 million, a decrease of 28% year-over-year [2] Market Reaction - CarMax's disappointing results led to a significant drop in its stock price, impacting other car retailers such as Group 1 Automotive, Penske Automotive Group, Sonic Automotive, Lithia Motors, AutoNation, and Carvana, which saw declines of around 2% to 4% [3]