Release Date: April 10, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- CarMax Inc (KMX, Financial) reported robust year-over-year EPS growth, driven by increased unit volume in sales and buys, higher gross profit, and improved cost efficiencies.
- The company achieved a record in buying vehicles from dealers, with a 114% increase in dealer-sourced vehicles compared to last year.
- CarMax Inc (KMX) saw a significant increase in digital engagement, with approximately 67% of retail unit sales being omni sales, up from 64% last year.
- CarMax Auto Finance (CAF) delivered an 8% increase in income, supported by a steady net interest margin and strategic credit spectrum expansion.
- The company achieved a 14% increase in total gross profit, with notable improvements in service gross profit and efficiency measures.
Negative Points
- Wholesale gross profit per unit declined from $1,120 to $1,045 year-over-year, despite being historically strong.
- The average selling price for wholesale units remained flat year-over-year, indicating potential pricing pressures.
- SG&A expenses increased by 5% or $30 million from the prior year, driven by higher compensation and advertising costs.
- The company anticipates a larger provision for loan losses in the first quarter due to new origination volume and lower credit quality.
- CarMax Inc (KMX) withdrew the timeline for its $30 billion sales goal due to macroeconomic uncertainties, indicating potential challenges in achieving long-term targets.
Q & A Highlights
Q: Can you explain the difference in market share performance between the first and second halves of fiscal '25, and how might rising used car prices affect your business?
A: In the first half, we faced a significant price correction, which masked our improvements. The second half saw better execution and efficiency gains. Rising used car prices could widen the gap between new and late-model used cars, potentially increasing demand for used vehicles. We've learned to better manage inventory and financing options, which positions us well for future challenges. - William Nash, CEO
Q: What are the current trends in used car sales, and how might new car tariffs impact your market share and industry growth?
A: December and January were strong, February was softer due to leap day and tax refund delays, but March saw a step-up in sales. New car tariffs could increase new car prices, pushing consumers towards used cars, especially late-model ones, which could benefit us. However, tariffs could also raise parts costs, impacting reconditioning expenses. - William Nash, CEO
Q: How does the investment in reconditioning centers and auctions affect your ability to handle older vehicles, and what are the expected cost savings?
A: The new centers increase capacity and allow us to maintain quality standards for older vehicles. We aim to achieve $250 in cost savings per unit, though tariffs could impact parts costs. The centers also reduce logistics costs by being closer to stores, providing ongoing savings. - William Nash, CEO
Q: How sustainable is the early fiscal Q1 performance given the fluid macro environment?
A: We don't see it as a catch-up from February. We expect the momentum from the last three quarters to continue, though macro factors remain fluid. We're monitoring the situation closely and have mitigation plans in place. - William Nash, CEO
Q: What steps are you taking to increase market share from the current 4% towards the 5% target?
A: We're focused on growing sales and EPS, which will naturally increase market share. We're gaining share from other dealers and see continued growth in the 0-10 year-old vehicle segment. Our strategies are in place to maintain this momentum. - William Nash, CEO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
