- Total Sales: $7.1 billion, down 7% year-over-year.
- Retail Unit Sales: Declined 3.1% year-over-year.
- Average Selling Price (Retail): Declined approximately $700 per unit or 3% year-over-year.
- Used Unit Comps: Down 3.8% year-over-year.
- Retail Gross Profit Per Used Unit: $2,347, in line with last year's $2,361.
- Wholesale Unit Sales: Down 8.3% year-over-year.
- Average Selling Price (Wholesale): Declined approximately $900 per unit or 10% year-over-year.
- Wholesale Gross Profit Per Unit: $1,064, up from $1,042 last year.
- Vehicles Purchased: Approximately 314,000, down 9% year-over-year.
- Online Retail Unit Sales: Approximately 14%, consistent with last year.
- Omnichannel Retail Sales: Approximately 57%, up from 54% last year.
- Total Revenue from Online Transactions: Approximately 30%, in line with last year.
- CarMax Auto Finance (CAF) Income: $147 million, up 7% year-over-year.
- Net Earnings Per Diluted Share: $0.97, down from $1.44 last year.
- Total Gross Profit: $792 million, down 3% year-over-year.
- Used Retail Margin: $495 million, down 4% year-over-year.
- Wholesale Vehicle Margin: $157 million, down 6% year-over-year.
- Other Gross Profit: $139 million, up 3% year-over-year.
- SG&A Expenses: $639 million, up 3% year-over-year.
- Share Repurchase: Approximately 1.4 million shares for $104 million.
- CAF Originations: Approximately $2.3 billion.
- Weighted Average Contract Rate: 11.4%, up 30 basis points year-over-year.
- Provision for Loan Losses: $81 million, flat year-over-year.
Release Date: June 21, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- CarMax Inc (KMX, Financial) delivered strong retail and wholesale gross profit per unit (GPU) and grew Extended Protection Plan (EPP) margins.
- The company sourced approximately 35,000 vehicles from dealers, an all-time record.
- CarMax Inc (KMX) increased used salable inventory units by 5% year over year.
- CarMax Auto Finance (CAF) income grew by 7% year over year under tight lending standards.
- The company repurchased over $100 million in shares during the quarter.
Negative Points
- Total sales for the quarter were $7.1 billion, down 7% compared to last year.
- Retail unit sales declined by 3.1%, and average selling price declined approximately $700 per unit or 3% year over year.
- Wholesale unit sales were down 8.3% versus the first quarter last year.
- First-quarter net earnings per diluted share were $0.97, down from $1.44 a year ago.
- SG&A expenses for the first quarter were $639 million, up 3% or $19 million from the prior year's quarter.
Q & A Highlights
Highlights from CarMax Inc (KMX) Q1 2025 Earnings Call
Q: Bill, I'd love to just start with the top of the funnel for you guys, just on same-store sales. I think you mentioned the comp trends improved as we moved through Q1, and we'd just love to get your thoughts on maybe how those improved and maybe what you're seeing now?
A: (William Nash, CEO) On your first question, I think what you're asking is basically comp cadence. So again, if you go back to the fourth quarter, the last call we did halfway through the quarter, we were running mid-single digit negative comps. Obviously, the back half of the quarter was better than the first half of the quarter, which we were encouraged by. And then if you look at June month to date for the new quarter, we're also continued -- we continue to see some improved performance and we're actually running slightly positive comp June month to date, so we're encouraged to see this continued improvement there.
Q: First, looking at the loss trends on your reserves continuing to see losses increase in your securitized portfolio. Your reserves looked a little bit like do you think that you're going to have to reserve more aggressively if the loss trends continue? And then secondly, how quickly can you ramp Tier 2 and Tier 3 lending as you now have a non-prime securitization program?
A: (Jon Daniels, SVP - CarMax Auto Finance) With regard to losses and delinquencies within the quarter, I'd say largely we were very much in line with what we expected for the quarter. And I think that's reflected in the provision year over year is basically flat. If you look at our reserve to receivable ratio flat sequentially. Certainly, we published data on a quarterly basis. Remember, that's roughly 60% of our portfolio. But again, the trends there as expected and bear in mind in the quarter, this quarter is typically a high volume quarter. So your actual provision will typically be higher because you've originated more and it's typically a lower credit quality quarter because of tax time as well. So add that, but for the most part, a nonevent for us from a delinquency and losses as it was right in line with our expectations.
Q: Just on the expense side. So if you give the ad spend per total I think that was up about 5% year over year compares to your guidance for flattish. And maybe just walk us through any changes you're seeing there on the ad spend line and just overall how we should think about SG&A dollars in Q2 and over the balance of the year.
A: (Enrique Mayor-Mora, CFO) Thanks for the question. I would tell you that's pretty benign, right? I think quarter to quarter, it's going to be a plus here, a little bit negative here on the total unit basis, which is again how we manage our total advertising spend. So I wouldn't look at that as anything other than just quarter-to-quarter fluctuations. But we are committed to managing to that roughly $200 per total unit for the balance of the year -- for the entire year, I should say.
Q: A couple of questions. I'll lump them together. I mean, first, just with regard to the -- this first non-prime securitization. I think it's a follow-up to Seth's question before but as we think about this development, I mean, how -- what are the ramifications longer term for CarMax? Is this going to be a potential vehicle to drive better share and better profitability, both? Again how should we think about the model question now with this capability?
A: (Jon Daniels, SVP - CarMax Auto Finance) Yeah, I'm going to continue to anchor us to this 43% of sales. As mentioned, we think there is some substantive volume that we can take above that and the best way to give orders of magnitude of the value, the long-term value here is we see it under the current financial situation, the current economics for every one point of sales that we can grab, we think that can drive $10 million to $12 million worth of value to CarMax. Now bear in mind that doesn't start day one when you begin to add that volume. Initially, you originate additional volume, you need to provision for loan losses but eventually becomes accretive. And once you get to steady state, that's where I'm referring to the $10 million to 12 million. So as you can imagine, as you tack on additional points you tack on additional value for CarMax. And in the long run, we think it's very substantial and something we're looking forward to going after.
Q: I guess it's on the improvement in sales you've been seeing. I mean, do you think that's broader industry dynamics? Do you think there's something operationally you're doing? I know, obviously at the top of the funnel is increasing conversions, then down a little bit is that starting to improve for you and if so, where and why?
A: (William Nash, CEO) Look, I think it's a combination of things. I think it reflects on just some of the continued work that we're doing internally, but it's also -- look, vehicle prices -- even though they were up quarter over quarter, they're always up from the fourth to the first. They were down $700 year over year. So we're seeing vehicle values be a little bit more stable. If you look at depreciation trends, for example, if you look the last two years, they're all over the board from appreciation to depreciation and they are steep, both ways. This year is a little bit more what I would call normal, although there is a difference in the first quarter last year.
Q: Bill, I just had a question on the strategy and operation. I think you can all see like the factual data on the unit comps, the market share. It's not where CarMax used to be historically. And if you look at your margins and like the EBITDA per unit, as you exclude the one-time items this quarter, they have not changed or improved. So I'm curious if you think the current strategy that you have around sourcing, the impact omnichannel has had on your in-store culture? Is all of that still the right approach? Or do you think something needs to change? Or are we just waiting for the industry backdrop to improve for CarMax to do better on all these metrics, especially when some of the public peers are doing better.
A: (William Nash, CEO) Look, I feel great about the strategy. I feel great about all the things that you talked about. I think what's really been the story for us, particularly is really what you've seen over the last 1.5 years, and it's been more about these big price corrections and what's going on the market, the fact that we sell a late-model high-quality car from an affordability standpoint. So if you look at the data,
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
