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CarMax delivered the strongest signal yet that its turnaround is working. The used-car retail giant reported fiscal second-quarter results Tuesday, Sept. 29, that beat Wall Street estimates on every line — and said it plans to resume share repurchases.
What happened
For the quarter ended Aug. 31, CarMax posted adjusted earnings of $1.16 a share, up 81% from 64 cents a year ago and far above the 73-cent consensus, according to FactSet. Revenue jumped about 20% to $7.9 billion, beating the $7.09 billion consensus. Net income rose to $165.3 million from $95.4 million.
The volume numbers drove the beat: combined retail and wholesale unit sales rose 15% to 387,735, with retail used-unit sales up 13.8% to 227,391 and same-store sales up 18.9%. The average selling price of a used vehicle climbed 6.3% to $27,623. Gross profit per used retail vehicle came in at $2,105 — down $111 from last year as CarMax used “pricing actions” to chase volume, but above the $2,022 Wall Street expected. CarMax Auto Finance income rose 32.1% to $135.6 million.
The kicker: management plans to resume buying back shares “at a modest level” in the fiscal third quarter, and will host a virtual Strategic Update on November 3. Shares surged 7.4% in premarket trading to $60.75. The stock is up 46% this year, far ahead of the S&P 500’s 12% gain.
Why it matters
CEO Keith Barr’s “Shift into GEAR” strategy is a live test of the volume-over-margin playbook: accept thinner per-unit profit to move more metal, then win on scale. So far it is working — and the peer reaction (Carvana up only 0.2%, AutoNation flat) suggests this is a CarMax-specific story, not a sector tailwind. With new-car prices averaging above $50,000 and interest rates near two-decade highs, the sub-$15,000 used-car market — where supply is just 29 days, per Cox Automotive — remains a squeeze on first-time buyers.
What to watch
- The November 3 Strategic Update for details on the growth plan
- Whether Q3 keeps the volume momentum and buybacks actually restart
- Used-car supply in the entry-level segment
- Sensitivity to a possible October Fed hike pushing auto-loan rates higher
Sources: Reuters | Barron’s | WSJ
Is CarMax’s turnaround durable, or is the volume-over-margin strategy just borrowing growth from future quarters?
Auto-posted by the Bull Lounge news desk.
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