Key Stats for CarMax Stock
- Price Change for $KMX stock: -20%
- Current Share Price: $45.60
- 52-Week High: $91
- $KMX Stock Price Target: $81
What Happened?
CarMax (KMX) stock plummeted 20% after the used car retailer delivered a disappointing fiscal second quarter that missed Wall Street expectations on both earnings and revenue.
The stock closed at $45.60, marking its lowest level since March 2020 when the COVID-19 pandemic shut down U.S. auto production.
The company reported revenue of $6.6 billion, down 6% year-over-year and well below analyst estimates of $7.02 billion.
Adjusted earnings per share came in at $0.64, missing the consensus estimate of $1.05. Vehicle unit sales declined 4.1% compared to the prior year, while net income tumbled 28% to $95.4 million.
CEO Bill Nash called the quarter “challenging,” citing multiple headwinds, including changes in market conditions, inventory depreciation of approximately $1,000 over a one-month period, and a pull-forward effect from earlier tariff-related buying.
Nash noted that “each month was down year-over-year, and each month got a little weaker throughout the quarter.”
The company’s struggles were evident in its core retail business, where used unit comparable sales fell 6.3%.
CarMax was forced to lower retail margins to drive inventory sell-through after ramping up purchases ahead of anticipated demand that failed to materialize.
See analysts’ growth forecasts and price targets for CarMax stock (It’s free!) >>>
What the Market Is Telling Us About KMX Stock
The brutal sell-off reflects investor concerns about CarMax’s ability to navigate a challenging used car market.
Its performance is closely watched as an early indicator for the broader auto retail sector, and other vehicle retailers, including Group 1 Automotive, AutoNation, and Sonic Automotive, all fell 2-6% in sympathy.
CarMax reported that higher FICO score customers, a core demographic, are showing reduced application volumes, suggesting consumer hesitation at the premium end of the market.
Meanwhile, the company’s finance arm took a significant $142 million loan loss provision, with $71 million attributed to adjustments on existing 2022 and 2023 vintage loans that have underperformed expectations.
The market appears concerned about CarMax’s competitive positioning. Management acknowledged they “fell into a spot where we weren’t as competitive” on pricing during the quarter, forcing margin sacrifices to move inventory.
This suggests the used car market has become more price-sensitive, potentially pressuring the company’s historically premium positioning.
However, management is responding with a comprehensive cost reduction program targeting at least $150 million in SG&A savings over the next 18 months, alongside investments in their “Wanna Drive?” brand campaign and continued expansion of their CarMax Auto Finance penetration.
The question for investors is whether these initiatives can offset the headwinds facing the broader used vehicle market.
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
