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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]

Economic Overview - The US economy grew at a revised annualized rate of 3.8% in the second quarter, marking the fastest growth in nearly two years [2][9][12] - Jobless claims fell to 218,000, down from an expected 233,000, indicating a stronger labor market [11][12] Trade and Tariffs - The Trump administration is considering additional tariffs on imports, including robotics and medical devices, which could increase costs for consumers and manufacturers [3][6] - A recent tariff reduction from 25% to 15% on EU cars and parts is expected to ease concerns in the European car sector [23][24] Company News - Starbucks announced a billion-dollar restructuring plan, which includes cutting 900 jobs and closing unprofitable stores [3][31] - CoreWeave expanded its partnership with OpenAI, increasing the total contract value to approximately $22.4 billion for AI model training [32] - CarMax shares dropped 18% after reporting a surprise decline in comparable sales, attributed to consumers rushing to buy vehicles before tariffs were imposed [33] Market Trends - The tech sector is experiencing a pullback, with concerns about a potential tech bubble as major companies engage in multi-billion dollar deals [35][36] - Analysts suggest a barbell strategy for investment, balancing high-growth tech stocks with more defensive, lower-volatility stocks [41][44]

Economic Indicators - US jobless claims decreased to 218,000 for the week ending Sept. 20, down from 232,000 previously, with continuing claims slightly falling to 1.92 million [2][15] - Q2 GDP growth rebounded at an annual rate of 3.8%, recovering from a 0.6% drop in Q1, surpassing the estimated 3.3% [15] Company Updates - Costco's quarterly earnings report is anticipated, with expectations of higher sales as consumers seek deals amid economic uncertainty [3][15] - Starbucks plans to cut 900 corporate jobs and close unprofitable stores as part of a turnaround strategy, with notifications to employees on Sept. 26 [5][15] - Starbucks CEO Brian Niccol stated that savings from job cuts will be reinvested into stores, including enhancements in customer service and new coffeehouse designs [6][15] - CarMax reported Q2 earnings of $0.64 EPS, missing the expected $1.03, and revenue of $6.59 billion, below the $7.05 billion estimate, leading to a 12% drop in shares premarket [7][15] Government and Market Impact - The White House has instructed federal agencies to prepare for permanent job cuts if a government shutdown occurs, targeting programs without legally required funding [9][15] - President Trump is planning to sign an agreement to separate TikTok's US operations from ByteDance, pending China's approval, which could involve a deal worth tens of billions [10][15] - Intel shares rose over 3% in premarket trading following reports of talks with Apple for an investment [11][15] Market Sentiment - Analysts suggest the stock market may be experiencing a new normal with high prices reflecting investor excitement but also risk, reminiscent of the dot-com era [12][15] - Despite concerns about overvalued stock prices, many investors remain optimistic, creating a tension between risk warnings and ongoing market enthusiasm [12][15]

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 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]

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Company Overview - DriveItAway Holdings, Inc. is a leader in digital mobility and flexible vehicle lease-to-own platforms [1] - The company provides a comprehensive, turn-key program with proprietary mobile technology, insurance coverages, and training for dealerships [3] Leadership Appointment - Mitch Fadel, former CEO of Upbound Group and Rent-A-Center, has joined DriveItAway's Board of Advisors [1] - Fadel brings extensive experience in the lease-to-own sector and has a track record of scaling companies profitably [1][5] Strategic Vision - The company aims to transform automotive retail by making affordable, flexible vehicle access a reality for underserved markets [1] - Fadel expressed excitement about helping DriveItAway capture the demand for personal transportation in these markets [1] Recent Developments - DriveItAway has announced a national partnership with Free2move, integrating flexible lease-to-own technology with OEM-backed vehicle supply [1] - This partnership is expected to create a powerful platform for rapid expansion in the automotive retail space [1]