CarMax (NYSE:) reported a decline in fourth-quarter earnings and revenue, missing Wall Street estimates and sending its shares down 7.6% before the market opened. The auto retailer reported adjusted earnings per share (EPS) of $0.32, below the analyst consensus of $0.46. Revenue also fell short of expectations, coming in at $5.6 billion, compared to the expected $5.79 billion.
Compared to the same quarter last year, net revenues decreased 1.7%. The company reported a modest increase in retail used unit sales of 1.3% and a slight increase in comparable store used unit sales of 0.1%. However, wholesale units saw a decline of 4.0%. CarMax cited vehicle affordability challenges, accentuated by inflationary pressures, higher interest rates and low consumer confidence, as factors impacting sales performance.
Gross profit per unit used at retail was $2,251, while for wholesale units it was $1,120, both down slightly from the prior year’s strong fourth quarter. The company purchased 234,000 vehicles from consumers and dealers, a decline of 10.8% compared to the same period last year. Despite these challenges, CarMax Auto Finance (CAF) revenue grew 18.9% due to a lower provision for credit losses and an increase in average receivables managed.
Bill Nash, president and CEO, commented on the results: “We are encouraged by the performance of our business during the fourth quarter. We experienced growth in total sales of used units and comps, achieved strong retail and retail gross profit wholesale per unit, continued to actively manage SG&A and significantly increase CAF revenue year over year.”
According to Nash, the company’s focus on improving its omnichannel experience and leveraging data science, automation and artificial intelligence has strengthened its operational foundation. Despite the reported earnings and revenue shortfalls, CarMax is optimistic about its positioning for future growth.
Investors reacted negatively to the earnings release, with the stock price reflecting concerns about the company’s ability to meet market expectations. The downward movement in the stock price after earnings suggests the market is weighing near-term challenges more heavily than the company’s strategic initiatives.