CarMax(KMX) - 2026 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company achieved total sales of $7.5 billion, a 6% increase year-over-year, driven by higher volume but partially offset by lower prices [6][17] - Earnings per diluted share (EPS) grew by 42% to $1.38, marking the fourth consecutive quarter of positive retail unit comps and double-digit year-over-year EPS growth [6][17] - Total gross profit reached $894 million, up 13% from the previous year, with retail gross profit per used unit at a record high of $2,407, an increase of $60 year-over-year [17][19] Business Line Data and Key Metrics Changes - Retail unit sales increased by 9%, with used unit comps up 8.1% [6][17] - Wholesale unit sales rose by 1.2%, while the average wholesale selling price decreased by approximately $150 per unit to $8,000 [7][17] - CarMax Auto Finance (CAF) originated over $2.3 billion, resulting in a sales penetration of 41.8%, which is 150 basis points below last year [11][12] Market Data and Key Metrics Changes - The company purchased approximately 336,000 vehicles during the quarter, a 7% increase from last year, with 288,000 vehicles sourced from consumers [7][8] - Digital capabilities supported 80% of retail unit sales, with 66% being omni-channel and 14% online [9][10] Company Strategy and Development Direction - The company is focused on enhancing its omni-channel experience, expanding gross profit, and managing credit spectrum expansion [4][5] - A new marketing campaign is set to launch later in the summer to promote the omni-channel experience and digital capabilities [10][22] - The company aims to achieve omni cost neutrality for the first time across three key metrics, indicating a strong focus on operational efficiency [20][21] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in sustaining sales growth and market share gains, attributing recent performance to both macro factors and internal improvements [36][47] - The outlook for the remainder of the year remains positive, with expectations for continued growth in sales and market share [47][48] Other Important Information - The company doubled its share repurchase pace, buying back approximately 3 million shares for a total of $200 million [22][27] - The loan loss provision for CAF was $102 million, influenced by seasonal sales and credit quality, with a total reserve balance of $474 million [12][14] Q&A Session Summary Question: Sustainability of used car business acceleration - Management noted that the acceleration is driven by both macro factors and internal improvements, with confidence in continued growth for the year [34][36] Question: SG&A expenses and future modeling - Management emphasized their commitment to leveraging SG&A and finding efficiencies, with a focus on maintaining expense control [37][39] Question: Guidance on comp growth for the balance of the year - Management indicated that they expect to continue growing sales and gaining market share, maintaining their outlook for the year [47][48] Question: Impact of student loans on consumer credit - Management reported that about 30% of their customers have student loans, but no material change in performance has been observed [71][72] Question: Marketing campaign details - The new marketing campaign aims to educate consumers about the omni-channel capabilities and the flexibility in purchasing options [60][62] Question: Credit penetration and growth strategy - Management confirmed plans to increase subprime penetration, targeting a growth rate of 50% in the future [65][66] Question: Share buyback spending trends - Management intends to modestly accelerate share buybacks throughout the fiscal year, based on valuation and cash flow dynamics [124][125]