Why Is Used Vehicle Retailer CarMax Stock Plunging Today?

CarMax Inc KMX shares are trading lower after the company reported a fourth-quarter FY24 sales decline of 1.7% year-on-year to $5.63 billion, missing the analyst consensus estimate of $5.79 billion.

The company sold 287,603 units through combined retail and wholesale channels, a decrease of 0.9% year-over-year.

KMX said vehicle affordability challenges continued to impact Q4 unit sales performance, as headwinds remained due to widespread inflationary pressures, higher interest rates, tightening lending standards and low consumer confidence.

The company bought 234,000 vehicles from consumers and dealers, down 10.8% versus last year.

Gross profit was $586.2 million, down 4.1% year-over-year. EPS of $0.32 missed the consensus estimate of $0.49.

Selling, general and administrative expenses increased 1.4% year-over-year to $580.9 million.

KMX held cash and equivalents of $574.1 million as of February 29, 2024. CarMax Auto Finance (CAF) income increased 18.9% at $147.3 million. 

As of February 29, 2024, CarMax had $2.36 billion remaining available for repurchase under the outstanding authorization.

KMX repurchased 685,600 shares of common stock for $49.3 million in the fourth quarter. In fiscal year 2025, the company intends to modestly accelerate the pace of its share repurchases above the pace it implemented in the third quarter of fiscal year 2024.

The company opened four stores in the fourth quarter and had a total of 245 used car stores as of February 29, 2024.

Outlook: CarMax sees FY25 capital expenditure of $500 million – $550 million.

The company reiterated its goal to sell more than 2 million combined retail and wholesale units annually. However, the company extended the timeframe to between fiscal year 2026 and fiscal year 2030 due to uncertainty in the timing of market recovery. 

Price Action: KMX shares are trading lower by 9.164% at $72.04 in premarket on the last check Thursday.

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