KMX Q1 Earnings: CarMax Matches Revenue Expectations, Misses Profit Targets Amid Shifting Market Dynamics
Used automotive vehicle retailer Carmax (NYSE:KMX) met Wall Street's revenue expectations in Q1 CY2025, with sales up 6.7% year on year to $6 billion. Its non-GAAP profit of $0.60 per share was 8.6% below analysts' consensus estimates.
Is now the time to buy KMX?
Revenue: $6 billion vs analyst estimates of $5.99 billion (6.7% year-on-year growth, in line)
Adjusted EPS: $0.60 vs analyst expectations of $0.66 (8.6% miss)
Adjusted EBITDA: $234.2 million vs analyst estimates of $228.7 million (3.9% margin, 2.4% beat)
Operating Margin: 2.5%, in line with the same quarter last year
Free Cash Flow Margin: 0.3%, down from 3.6% in the same quarter last year
Locations: 250 at quarter end, up from 245 in the same quarter last year
Same-Store Sales rose 5.9% year on year (-2% in the same quarter last year)
Market Capitalization: $9.93 billion
CarMax's first quarter results reflected steady growth in unit sales and improved operational efficiency, driven by investments in technology and a broader product mix. Management attributed the year-on-year sales increase to enhanced digital capabilities, a more efficient sourcing process from both consumers and dealers, and ongoing cost savings across logistics and reconditioning operations. CEO Bill Nash cited the company's ability to offer a seamless online and in-store experience as a key differentiator in the highly competitive used car market.
Looking forward, CarMax's leadership emphasized the potential impact of new tariffs and rising parts costs, which could influence both demand and profitability. They highlighted ongoing efforts to mitigate these risks through cost control and expanded financing offerings, while also noting that macroeconomic uncertainty and shifting consumer preferences continue to shape the company's outlook. Management was cautious in its forward guidance, focusing on sustaining recent momentum and adapting to changing market conditions.
CarMax's management provided a comprehensive update on the factors driving the quarter's performance and the company's evolving strategy. They highlighted improvements in unit volumes, digital engagement, and operational efficiencies, while also addressing near-term challenges around profitability and external cost pressures. The discussion underscored CarMax's commitment to balancing growth initiatives with prudent cost management in a volatile economic environment.
Digital Sales Integration: CarMax saw a growing proportion of retail transactions supported by digital tools, with 67% of sales classified as 'omni-channel' under the updated definition. Management expects continued growth in digitally assisted sales as online tools and customer adoption improve.
Supply Chain and Sourcing: The company achieved record vehicle sourcing from both consumers and dealers, driven by enhancements to its online appraisal platform and dealer-facing solutions. These initiatives are designed to broaden inventory and better meet shifting consumer demand.
Financing Model Expansion: CarMax Auto Finance (CAF) expanded its lending across more segments of the credit spectrum. By retaining a greater share of profitable loan originations previously allocated to third parties, management expects to increase CAF's penetration and drive long-term income growth, despite higher near-term provisions for loan losses.
Operational Efficiency Gains: The company reported meaningful cost savings in logistics and reconditioning, exceeding initial targets with $125 per unit in annual efficiency improvements. These savings are expected to help offset rising parts costs and support affordability for customers.
Market Share and Product Mix: CarMax experienced notable growth in sales of late-model (zero to four-year-old) vehicles, while maintaining its presence in the six- to ten-year-old segment. Management emphasized a flexible approach to inventory mix, based on evolving consumer preferences and market dynamics.
Management's outlook for the coming quarters is shaped by ongoing investments in digital capabilities, efficiency initiatives, and expanded financing options, all set against a backdrop of macroeconomic uncertainty and possible cost inflation. No explicit revenue or profit guidance was provided for the next quarter or the full year.
Tariffs and Cost Pressures: New tariffs on automotive imports and rising parts prices could increase costs for both new and used vehicles. Management plans to mitigate these impacts through ongoing efficiency gains and pricing strategies, but acknowledged uncertainty around the ultimate effect on demand and margins.
Financing Penetration: CarMax's strategy to broaden its credit spectrum and recapture more loan originations is expected to drive future income growth in CarMax Auto Finance, albeit with temporarily higher provisions for loan losses as the mix shifts.
Digital Experience Enhancements: Continued investment in online tools and customer-facing technology is aimed at increasing conversion rates, improving the shopping experience, and supporting sales growth, especially as consumer preferences evolve toward more digital interactions.
Sharon Zackfia (William Blair): Asked about the drivers behind the company's market share recovery and lessons learned from earlier periods of share loss; management cited improved execution, expanded sourcing, and adaptability to changing consumer preferences.
Seth Basham (Wedbush Securities): Inquired about the impact of new car tariffs on used vehicle demand and CarMax's share gains; CEO Bill Nash explained that higher new car prices could drive more consumers to the used market, especially for late-model vehicles.
John Murphy (Bank of America): Questioned the sustainability of operational cost savings and the company's ability to maintain margins amid changing reconditioning and supply chain dynamics; management highlighted ongoing efficiency efforts and the benefits of additional reconditioning capacity.
Rajat Gupta (JPMorgan): Sought details on how CarMax is managing inventory acquisition amid tariff uncertainty and auction market volatility; management emphasized long-standing expertise in inventory management and reliance on data-driven sourcing.
Chris Bottiglieri (BNP Paribas): Asked if CarMax has remaining cost levers to pull in the event of an economic downturn; CFO Enrique Mayor-Mora responded that further efficiency improvements are planned and the company retains the ability to adjust costs as needed.
In upcoming quarters, our analysts will watch (1) the company's ability to manage cost inflation and pass along efficiency gains to offset tariff-related headwinds, (2) the pace of growth in digitally supported and omni-channel sales as technology initiatives mature, and (3) continued expansion of CarMax Auto Finance's penetration across the credit spectrum. Execution on these fronts, along with adaptability to macroeconomic and industry shifts, will be critical indicators of CarMax's ability to sustain growth and profitability.
Could KMX achieve its goals and exceed our expectations? See for yourself in our free research report.
The market surged in 2024 and reached record highs after Donald Trump's presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025.
While the crowd speculates what might happen next, we're homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver's seat and build a durable portfolio by checking out our Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 175% over the last five years.
Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like Comfort Systems (+751% five-year return). Find your next big winner with StockStory today.
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Business Upturn
4 hours ago
- Business Upturn
ROSEN, LEADING INVESTOR COUNSEL, Encourages Reddit, Inc. Investors to Secure Counsel Before Important Deadline in Securities Class Action
NEW YORK, June 21, 2025 (GLOBE NEWSWIRE) — WHY: Rosen Law Firm, a global investor rights law firm, announces the filing of a class action lawsuit on behalf of purchasers of securities of Reddit, Inc. (NYSE: RDDT) between October 29, 2024 and May 20, 2025, both dates inclusive (the 'Class Period'). A class action lawsuit has already been filed. If you wish to serve as lead plaintiff, you must move the Court no later than August 18, 2025. SO WHAT: If you purchased Reddit securities during the Class Period you may be entitled to compensation without payment of any out of pocket fees or costs through a contingency fee arrangement. WHAT TO DO NEXT: To join the Reddit class action, go to or call Phillip Kim, Esq. at 866-767-3653 or email [email protected] for more information. A class action lawsuit has already been filed. If you wish to serve as lead plaintiff, you must move the Court no later than August 18, 2025. A lead plaintiff is a representative party acting on behalf of other class members in directing the litigation. WHY ROSEN LAW: We encourage investors to select qualified counsel with a track record of success in leadership roles. Often, firms issuing notices do not have comparable experience, resources, or any meaningful peer recognition. Be wise in selecting counsel. The Rosen Law Firm represents investors throughout the globe, concentrating its practice in securities class actions and shareholder derivative litigation. Rosen Law Firm achieved the largest ever securities class action settlement against a Chinese Company at the time. Rosen Law Firm was Ranked No. 1 by ISS Securities Class Action Services for number of securities class action settlements in 2017. The firm has been ranked in the top 4 each year since 2013 and has recovered hundreds of millions of dollars for investors. In 2019 alone the firm secured over $438 million for investors. In 2020, founding partner Laurence Rosen was named by law360 as a Titan of Plaintiffs' Bar. Many of the firm's attorneys have been recognized by Lawdragon and Super Lawyers. DETAILS OF THE CASE: According to the lawsuit, throughout the Class Period, defendants made false and misleading statements and/or failed to disclose that: (1) changes in Google Search's algorithm and features like AI Overview were causing users to stop their query on Google search; (2) these algorithm changes were materially different than prior instances of reduced traffic to the Reddit website; (3) defendants were aware that the increase in the query term 'Reddit' on search engines was because users were getting the sought after answer from Google Search without having to go to Reddit, and not because they intended to visit Reddit; (4) this zero-click search reality was dramatically reducing traffic to Reddit in a manner Reddit was unable to overcome in the short term; and (5) defendants, therefore, lacked a reasonable basis for its outlook on user rates and advertising revenues. When the true details entered the market, the lawsuit claims that investors suffered damages. To join the Reddit class action, go to or call Phillip Kim, Esq. at 866-767-3653 or email [email protected] for more information. No Class Has Been Certified. Until a class is certified, you are not represented by counsel unless you retain one. You may select counsel of your choice. You may also remain an absent class member and do nothing at this point. An investor's ability to share in any potential future recovery is not dependent upon serving as lead plaintiff. Follow us for updates on LinkedIn: on Twitter: or on Facebook: Attorney Advertising. Prior results do not guarantee a similar outcome. ——————————- Contact Information: Laurence Rosen, Esq. Phillip Kim, Esq. The Rosen Law Firm, P.A. 275 Madison Avenue, 40th Floor New York, NY 10016 Tel: (212) 686-1060 Toll Free: (866) 767-3653 Fax: (212) 202-3827 [email protected]
Yahoo
4 hours ago
- Yahoo
Does The Market Have A Low Tolerance For GreenTree Hospitality Group Ltd.'s (NYSE:GHG) Mixed Fundamentals?
It is hard to get excited after looking at GreenTree Hospitality Group's (NYSE:GHG) recent performance, when its stock has declined 18% over the past three months. We, however decided to study the company's financials to determine if they have got anything to do with the price decline. Stock prices are usually driven by a company's financial performance over the long term, and therefore we decided to pay more attention to the company's financial performance. Specifically, we decided to study GreenTree Hospitality Group's ROE in this article. Return on equity or ROE is an important factor to be considered by a shareholder because it tells them how effectively their capital is being reinvested. In other words, it is a profitability ratio which measures the rate of return on the capital provided by the company's shareholders. This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality. Return on equity can be calculated by using the formula: Return on Equity = Net Profit (from continuing operations) ÷ Shareholders' Equity So, based on the above formula, the ROE for GreenTree Hospitality Group is: 7.2% = CN¥107m ÷ CN¥1.5b (Based on the trailing twelve months to December 2024). The 'return' is the amount earned after tax over the last twelve months. So, this means that for every $1 of its shareholder's investments, the company generates a profit of $0.07. See our latest analysis for GreenTree Hospitality Group We have already established that ROE serves as an efficient profit-generating gauge for a company's future earnings. We now need to evaluate how much profit the company reinvests or "retains" for future growth which then gives us an idea about the growth potential of the company. Generally speaking, other things being equal, firms with a high return on equity and profit retention, have a higher growth rate than firms that don't share these attributes. On the face of it, GreenTree Hospitality Group's ROE is not much to talk about. Next, when compared to the average industry ROE of 19%, the company's ROE leaves us feeling even less enthusiastic. For this reason, GreenTree Hospitality Group's five year net income decline of 16% is not surprising given its lower ROE. We reckon that there could also be other factors at play here. Such as - low earnings retention or poor allocation of capital. That being said, we compared GreenTree Hospitality Group's performance with the industry and were concerned when we found that while the company has shrunk its earnings, the industry has grown its earnings at a rate of 33% in the same 5-year period. Earnings growth is a huge factor in stock valuation. What investors need to determine next is if the expected earnings growth, or the lack of it, is already built into the share price. This then helps them determine if the stock is placed for a bright or bleak future. Is GreenTree Hospitality Group fairly valued compared to other companies? These 3 valuation measures might help you decide. In spite of a normal three-year median payout ratio of 27% (that is, a retention ratio of 73%), the fact that GreenTree Hospitality Group's earnings have shrunk is quite puzzling. So there could be some other explanations in that regard. For instance, the company's business may be deteriorating. Moreover, GreenTree Hospitality Group has been paying dividends for six years, which is a considerable amount of time, suggesting that management must have perceived that the shareholders prefer consistent dividends even though earnings have been shrinking. Overall, we have mixed feelings about GreenTree Hospitality Group. Even though it appears to be retaining most of its profits, given the low ROE, investors may not be benefitting from all that reinvestment after all. The low earnings growth suggests our theory correct. Wrapping up, we would proceed with caution with this company and one way of doing that would be to look at the risk profile of the business. Our risks dashboard would have the 4 risks we have identified for GreenTree Hospitality Group. — Investing narratives with Fair Values Vita Life Sciences Set for a 12.72% Revenue Growth While Tackling Operational Challenges By Robbo – Community Contributor Fair Value Estimated: A$2.42 · 0.1% Overvalued Vossloh rides a €500 billion wave to boost growth and earnings in the next decade By Chris1 – Community Contributor Fair Value Estimated: €78.41 · 0.1% Overvalued Intuitive Surgical Will Transform Healthcare with 12% Revenue Growth By Unike – Community Contributor Fair Value Estimated: $325.55 · 0.6% Undervalued View more featured narratives — Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Error while retrieving data Sign in to access your portfolio Error while retrieving data Error while retrieving data Error while retrieving data Error while retrieving data
Yahoo
4 hours ago
- Yahoo
Why Redwire Stock Tumbled by Nearly 17% This Week
The company fell earthward after it announced a capital-raising measure. It's also now on the hook for its latest portfolio acquisition. 10 stocks we like better than Redwire › Friday probably didn't come fast enough for space exploration equipment specialist Redwire (NYSE: RDW). After all, according to data compiled by S&P Global Market Intelligence, its share price fell by nearly 17% this week. A dilutive share issue and the closing of a pricey asset buy were two key factors in that double-digit dip. On Monday after market close, Redwire announced that it is floating a secondary issue of its common stock, and the following day divulged that the issue is being upsized. Ultimately, Redwire aims to float just over 15.5 million such shares at a price of $16.75 apiece, for total gross proceeds of roughly $260 million. Also, the underwriters of the issue have been granted a 30-day option to collectively purchase up to an additional 2.3 million-plus shares. Redwire said that it will use the net proceeds of the flotation for purposes such as balance sheet strengthening, the repurchase of convertible preferred stock outstanding, and debt retirement. Investors rarely greet news of share dilution warmly, and this issue certainly qualifies -- at the moment, Redwire's outstanding common share count is less than 142.6 million. While it's going to the well for more funds, at the same time, Redwire is about to spend a pile. On Wednesday, private equity firm Sleeping Bear Capital announced the completion of its sale of Edge Autonomy to Redwire. The deal, valued at over $1.1 billion, gives the company an unmanned aerial vehicle (UAV) developer that has contracts with federal agencies, as well as public-sector clients abroad. Since Redwire is still at a relatively early stage in its business life, it has to take available opportunities to keep its finances strong, and to grow. Dilution isn't pleasant, of course, but hopefully the company will manage to deploy that fresh capital smartly and efficiently. We can say the same for its ownership of Edge Autonomy. Before you buy stock in Redwire, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the for investors to buy now… and Redwire wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $659,171!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $891,722!* Now, it's worth noting Stock Advisor's total average return is 995% — a market-crushing outperformance compared to 172% for the S&P 500. Don't miss out on the latest top 10 list, available when you join . See the 10 stocks » *Stock Advisor returns as of June 9, 2025 Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. Why Redwire Stock Tumbled by Nearly 17% This Week was originally published by The Motley Fool
