On the Dash:
- CarMax’s used-car profit fell for a fourth straight quarter, despite an $8 billion revenue beat.
- Shares tumbled 9.4% as investors questioned the durability of the company’s ongoing turnaround effort.
- CEO Keith Barr unveiled a four-pillar growth strategy, calling the turnaround a multiyear process.
CarMax shares fell Wednesday as comparable store sales and used-vehicle profit declined for a fourth straight quarter. The trend is raising questions about the durability of the company’s turnaround effort, according to Bloomberg.
Shares fell 9.4% on the news Wednesday. The stock had gained 35% this year through Tuesday’s close, remaining down by two-thirds from its 2021 high.
Comparable store used vehicle sales fell 0.8% in the quarter ended May 31, a smaller decline than analysts had expected. At the same time, gross profit from used-vehicle sales also fell. Gross profit per used vehicle fell to $2,177, down $230 from last year’s all-time record. The company says the decline is due to price cutting taken to drive sales. Meanwhile, wholesale gross profit per unit was $1,046, in line with the prior year.
The first-quarter fiscal 2027 report follows fourth-quarter results released in April, when shares fell 14% on similar margin concerns.
President and CEO Keith Barr used the report to introduce a four-pillar growth strategy:
- A more connected digital and in-store experience.
- Growth in CarMax Auto Finance.
- Extended Protection Plan profitability.
- Expanded cost-cutting measures.
“We are entering this fiscal year with a clear strategy that is driving early results,” Barr said in the earnings release. “Our goal is clear: deliver strong unit sales and earnings growth that enables us to consistently reward our shareholders.”
CarMax remains on track for $200 million in cost savings by the end of fiscal 2027.
The company plans to hold a Strategic Update event in late fall with more details on its growth plan. Second-quarter results are scheduled for release on Sept. 29.
