CarMax shares fell over 20% on Thursday after the group reported lower-than-expected results, confirming the ongoing difficulties in the used car market. In Q2 ended August 31, the retailer reported EPS of $0.99, below expectations of $1.05, on revenue of $6.6bn, down 6% y-o-y and below the anticipated $7.02bn. CEO Bill Nash described it as a "challenging" quarter, marked by macroeconomic pressures and weaker demand.
Performance deteriorated significantly, with total vehicle sales down 4.1% and net income falling 28% to $95.4m. The stock fell below $45, its lowest level since March 2020, and is down 46% YTD, bringing CarMax's market capitalization to less than $6.7bn.
Considered a barometer for the entire sector, these results weighed on other automotive stocks. Group 1 Automotive, Penske, Sonic Automotive, and Lithia Motors fell about 2%, whileAutoNation and Carvana fell 4%. The market remains concerned about the impact of rising interest rates, consumer credit pressures, and increased household sensitivity to vehicle prices - both for new and used cars.
CarMax, Inc. is a retailer of used autos. The Company operates through two segments: CarMax Sales Operations and CarMax Auto Finance (CAF). The CarMax Sales Operations segment consists of all aspects of its auto merchandising and service operations. Its CarMax Sales Operations segment sells used vehicles, purchases used vehicles from customers and other sources, sells related products and services, and arranges financing options for customers. The CAF segment consists solely of its own finance operation that provides financing to customers buying retail vehicles from the Company. The CAF segment also services all auto loans it originates and is responsible for providing billing statements, collecting payments, maintaining contact with delinquent customers, and arranging for the repossession of vehicles securing defaulted loans. It provides customers with a range of other related products and services, including extended protection plan (EPP) products and vehicle repair services.
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