CarMax used-car sales fall on dwindling consumer confidence


CarMax Inc. said it sold fewer used vehicles in its fiscal fourth quarter as a result of faltering consumer confidence and affordability issues, though revenues from those sales grew nearly 33 percent because of a surge in average retail selling prices.

The company said net earnings for the quarter that ended Feb. 28 slipped 24 percent to $159.8 million. Revenue during the quarter surged 49 percent to $7.7 billion.

The number of used vehicles sold by CarMax fell 5.2 percent to 194,318 in the fiscal fourth quarter. Same-store used-vehicle unit sales also fell 6.5 percent from the year-earlier period.

CarMax shares fell as results missed analyst estimates. As of 1:11 p.m. EDT, CarMax shares slipped 6.9 percent to $96.03.

Sustained high vehicle prices and economic uncertainty pushed some customers away. In fact, the average price of a used car rose nearly 40 percent — or by $8,300 — to about $29,312 in the quarter, the Richmond, Va.-based company said.

“Right after we saw the [omicron] COVID surge, we started seeing a lack of consumer confidence,” CarMax CEO Bill Nash said during a Tuesday quarterly earnings call with analysts and investors. “From an affordability standpoint, you’ve got interest rates going up, inflation, the Ukraine-Russia war … there’s just a lot weighing on the consumer right now.”

However, CarMax’s combined retail and wholesale vehicle sales rose to 343,413, up 11.3 percent from the year-earlier period. The company fared better on the wholesale end: It reported 149,095 wholesale vehicle sales in the quarter, up 44 percent.

The consumer price index tracking used vehicles fell 3.8 percent in March compared with February, according to the Bureau of Labor Statistics. That’s the second straight monthly decline for the category, although prices are still 35 percent higher than they were a year ago.

CarMax also dealt with higher expenses in the quarter, which grew 22.5 percent to almost $621 million. The company said it spent more on its technology platforms, Edmunds consolidation and advertising, and it saw additional costs stemming from appraisal buys, new stores, customer experience centers and compensation increases.

The company reported total gross profit of $711 million in the quarter, up about 11 percent year-over-year. Retail used-vehicle gross profit fell 0.2 percent to $426.6 million due to a combination of CarMax’s used-vehicle sales volume declining and profit per vehicle sold rising $109 to $2,195.

Total wholesale vehicle gross profit jumped 73 percent to $177.5 million in the quarter. Profit per vehicle rose $201 to $1,191.

CarMax said other gross profit fell 3.8 percent to $106.9 million as its service margins declined due to fewer used vehicles being sold and COVID-19 affecting its technician staff and reconditioning abilities.

CarMax’s selling, general and administrative expenses as a percent of gross profit were 87.3 percent in the quarter, compared with 79 percent in the year-earlier period.

Results from the company’s earnings report include:

Q4 net earnings: $159.8 million, compared with $209.9 million in the year-earlier period.

Q4 net revenue: $7.7 billion, up 49 percent from a year earlier.

Fiscal year net earnings: $1.15 billion, compared with $746.9 million in the year-earlier period.

Fiscal year net revenue: $31.9 billion, up 68.3 percent from a year earlier.

CarMax ranks No. 1 on Automotive News‘ list of the top 100 retailers ranked by used-vehicle sales, with retail sales of 832,640 used vehicles in 2020.

Bloomberg contributed to this report.

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