Why CarMax Shares Are Surging Today

CarMax Inc KMX reported a first-quarter FY23 sales decline of 17.4% year-on-year to $7.69 billion, beating the analyst consensus of $7.53 billion.

The company sold 378,972 units through combined retail and wholesale channels, a decrease of 11.3% year-over-year.

KMX said vehicle affordability challenges continued to impact Q1 unit sales performance, as headwinds remained due to widespread inflationary pressures, higher interest rates, tightening lending standards and prolonged low consumer confidence.

The company bought 343,000 vehicles from consumers and dealers, down 5.2% versus last year.

Gross profit was $817.4 million, down 6.6% year-over-year.

Adjusted EPS of $1.16 beat the consensus estimate of $0.79.

Selling, general and administrative expenses decreased 14.8% year-over-year to $559.8 million.

KMX held cash and equivalents of $935.55 million as of May 31, 2023.

As of May 31, 2023, CarMax had $2.45 billion remaining available for repurchase under the outstanding authorization.

"We are prioritizing projects that drive operating efficiencies and create better experiences for our associates and customers," said CEO Bill Nash.

"We believe these steps will enable us to come out of this cycle leaner and more effective, while also positioning us for future growth."

KMX did not repurchase any shares of common stock during the quarter and had $2.45 billion remaining available for repurchase under the outstanding authorization as of May 31, 2023.

Outlook: Carmax said it plans to open five new locations in FY24.

It plans to release results for the second quarter ending August 31, 2023, on Thursday, September 28, 2023.

Price Action: CarMax shares were trading higher by 7.89% at $84.50 in premarket on Friday.