On September 26, 2024, CarMax Inc (KMX, Financial) released its 8-K filing for the second quarter of fiscal year 2025, ending August 31, 2024. CarMax, the largest used-vehicle retailer in the US, reported a notable increase in retail used unit sales and a double-digit earnings growth, despite a slight decline in wholesale units.
Company Overview
CarMax Inc (KMX, Financial) sells, finances, and services used and new cars through a chain of around 250 used retail stores. Formed in 1993 as a unit of Circuit City and spun off in 2002, CarMax's used-vehicle sales typically account for about 83% of revenue. In fiscal 2024, the company retailed and wholesaled 765,572 and 546,331 used vehicles, respectively. CarMax is based in Richmond, Virginia.
Performance and Challenges
CarMax Inc (KMX, Financial) reported a 5.1% increase in retail used unit sales and a 4.3% rise in comparable store used unit sales from the prior year’s second quarter. However, wholesale units saw a slight decrease of 0.3%. The company’s gross profit per retail used unit remained steady at $2,269, while the gross profit per wholesale unit was $975, consistent with last year.
Despite these gains, CarMax faced challenges in its CarMax Auto Finance (CAF) segment, where income declined by 14.4% due to an increase in the provision for loan losses. This was attributed to the recent industry-wide worsening of auto loan losses.
Financial Achievements
CarMax Inc (KMX, Financial) achieved a net earnings per diluted share of $0.85, surpassing the analyst estimate of $0.84 and marking a 13.3% increase from the previous year’s $0.75. The company also repurchased $106.1 million in shares of common stock during the quarter.
Key Financial Metrics
CarMax Inc (KMX, Financial) reported total net sales and operating revenues of $7,013.5 million, a slight decrease of 0.9% from the prior year’s $7,073.8 million. The company’s total gross profit increased by 9.1% to $760.5 million. SG&A expenses rose by 4.2% to $610.6 million, driven by increased compensation and benefits, and higher occupancy costs.
| Metric | Q2 FY25 | Q2 FY24 | Change |
|---|---|---|---|
| Net Sales and Operating Revenues | $7,013.5 million | $7,073.8 million | -0.9% |
| Gross Profit | $760.5 million | $696.9 million | 9.1% |
| Net Earnings per Diluted Share | $0.85 | $0.75 | 13.3% |
Analysis
CarMax Inc (KMX, Financial) demonstrated resilience in the face of industry challenges, particularly in the auto finance sector. The company’s ability to grow retail used unit sales and maintain strong gross profit margins is a positive indicator of its operational efficiency and market positioning. However, the decline in wholesale revenues and the increased provision for loan losses highlight areas that require strategic focus.
Overall, CarMax Inc (KMX, Financial) continues to leverage its diversified business model and omni-channel capabilities to drive future sales and profitability, positioning itself well for continued growth in the competitive used-vehicle market.
Explore the complete 8-K earnings release (here) from CarMax Inc for further details.
