
CarMax Exceeds Second-Quarter Revenue Expectations Due to Increased Unit Sales, Reports Reuters
By Ananta Agarwal
Used car retailer CarMax surpassed Wall Street’s expectations for its second-quarter revenue as price reductions on used vehicles led to increased unit sales, particularly in the retail sector. This positive performance resulted in a 6.4% rise in the company’s shares during afternoon trading.
The pre-owned vehicle market has faced challenges, with profitability declining as the availability of new cars has improved after pandemic-related supply shortages drove up used car prices.
To safeguard its profit margins, CarMax has implemented several cost-cutting strategies over recent years, including reducing marketing and capital expenditures.
The company experienced a 2.9% rise in the number of vehicles sold during the second quarter, with retail segment unit sales climbing 5.1% and revenue increasing by 1.5% compared to the previous year.
However, the gains in unit sales were tempered by a decrease in income from CarMax’s lending operations, as it had to raise provisions for loan losses. Reports indicate that tighter consumer budgets have adversely affected car loan payments for some borrowers.
CarMax’s total revenue for the quarter was $7.01 billion, showing a slight decline of about 1% from the prior year. Nonetheless, this figure exceeded analysts’ average expectations of $6.79 billion.
Despite the increased provisions for loan losses, analysts like Sharon Zackfia from William Blair noted a "larger inflection in retail sales." She expressed optimism that the momentum in sales over the coming quarters could outweigh the impact of higher loan provisions.
The average selling price per vehicle in the second quarter dropped by 4.6% for used retail units and 12.9% for wholesale units.
CarMax reported earnings per share of 85 cents for the quarter, slightly below the forecast of 86 cents, but still representing a 13.3% increase from 75 cents in the same period last year.