Cars and Drivers

CarMax Hammers Estimates as Store Traffic Leads Sales

Cars on a lot
Source: Thinkstock
CarMax Inc. (NYSE: KMX) reported first-quarter fiscal 2015 results before markets opened Friday. The used-car retailer reported quarterly diluted earnings per share (EPS) of $0.76 on revenues of $3.75 billion. In the same period a year ago, CarMax reported EPS of $0.64 on revenue of $3.31 billion. First-quarter results also compare to the Thomson Reuters consensus estimates for EPS of $0.67 and $3.59 billion in revenue.

The company did not offer guidance, but consensus second-quarter estimates call for EPS of $0.65 on revenues of $3.54 billion. For the full year, consensus estimates call for EPS of $2.43 on revenues of $13.99 billion. Perhaps the post-report conference call will provide the company’s forecast for the rest of this fiscal year.

The company’s CEO said:

We had another great quarter, hitting an all-time record level of quarterly sales and earnings. The improvement was broad-based, with contributions from our retail and wholesale operations, as well as from [CarMax Auto Finance].

Same-store sales of used vehicles rose 3.4% year-over-year, which the company attributed to improvements in more customer traffic. The company’s auto finance group posted a profit gain of 8.6% year-over-year. CarMax is also continuing its tests of originating loans for subprime borrowers that the company would typically direct to third-partner lenders for financing. As of the end of May, the company has $29.6 million outstanding in the program, about two-thirds of which represents loans made in the first quarter.

Used car sales have risen even faster than new car sales. Prices for used cars were up 1.7% year-over-year in the first calendar quarter of 2014, according to Edmunds.com, and up 1.4% sequentially. Sales were down from 9.8 to 9.1 million vehicles, but weather played a large role in that drop. Days to turn in the quarter was 42, up one day year-over-year and two days sequentially.

CarMax shares were up more than 16% in premarket trading Friday, at $52.75 in a 52-week range of $42.21 to $53.08. Thomson Reuters had a consensus analyst price target of around $53.00 before the results were announced.

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