CarMax Inc (KMX) Q1 2026 Earnings Call Highlights: Record Retail Gross Profit and Strong Sales ...

Total Sales: $7.5 billion, up 6% year-over-year.
Retail Unit Sales: Increased 9% with used unit comps up 8.1%.
Average Retail Selling Price: $26,100, a decrease of approximately $400 per unit year-over-year.
Wholesale Unit Sales: Up 1.2% year-over-year.
Average Wholesale Selling Price: $8,000, a decline of approximately $150 per unit.
Net Earnings Per Diluted Share: $1.38, up 42% year-over-year.
Total Gross Profit: $894 million, up 13% year-over-year.
Retail Gross Profit Per Used Unit: $2,407, up $60 year-over-year, a record high.
Wholesale Gross Profit Per Unit: $1,047, historically strong but slightly down from last year.
SG&A Expenses: $660 million, up 3% year-over-year.
SG&A to Gross Profit: Leveraged by 680 basis points to 74%.
CarMax Auto Finance Originations: Over $2.3 billion with a sales penetration of 41.8%.
Net Interest Margin: 6.5%, up over 30 basis points year-over-year.
Loan Loss Provision: $102 million, with a total reserve balance of $474 million.
Share Repurchases: Approximately 3 million shares for $200 million.
Warning! GuruFocus has detected 4 Warning Signs with KMX.
Release Date: June 20, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
CarMax Inc (NYSE:KMX) achieved a 42% growth in earnings per share, marking the fourth consecutive quarter of positive retail unit comps and double-digit EPS growth.
The company reported total sales of $7.5 billion, a 6% increase from the previous year, driven by higher volume despite lower prices.
Retail gross profit per used unit reached an all-time high, supported by strong demand and operational efficiencies in logistics and reconditioning.
CarMax Inc (NYSE:KMX) successfully leveraged SG&A expenses, achieving a 680 basis point improvement as a percentage of gross profit.
The company doubled its share repurchase pace, buying back approximately 3 million shares for $200 million, with $1.74 billion of repurchase authorization remaining.
CarMax Auto Finance's sales penetration decreased by 150 basis points year-over-year, primarily due to an influx of self-funded higher credit purchasers.
The average retail selling price decreased by approximately $400 per unit year-over-year, reflecting pricing pressures.
Wholesale gross profit per unit, while historically strong, was slightly down from the previous year.
The loan loss provision increased to $102 million, influenced by higher sales and lower credit quality, as well as uncertain economic outlooks.
The company's digital sales, while significant, saw a slight decline in the percentage of total sales compared to the previous quarter.
Q: How are you viewing the sustainability of the recent acceleration in your used car business, and how should we consider expenses coming back into the model? A: William Nash, President and CEO, explained that the business's recent performance is driven by both macro factors and internal improvements such as inventory management and pricing strategies. He expressed confidence in continued sales growth and market share gains. Enrique Mayor-Mora, CFO, added that SG&A leverage is a focus, with variable costs being managed effectively to support sales growth.
Q: With comp growth fluctuating and comparisons becoming more difficult, how should we model comp growth for the rest of the year? A: William Nash stated that while two-year or three-year stacks can provide some insights, they are not entirely reliable due to various dynamics over the years. He reiterated confidence in growing sales and gaining market share, maintaining the outlook provided at the beginning of the year.
Q: Can you provide more color on the shift in non-prime loans and the impact on provisions? A: Jon Daniels, EVP of CarMax Auto Finance, explained that the held-for-sale transaction allows CarMax to avoid holding loss reserves for certain non-prime receivables, mitigating risk and capturing gains upfront. This strategy supports growth in the non-prime segment while managing risk.
Q: What is the strategy behind the new marketing campaign to highlight your omnichannel capabilities? A: William Nash highlighted the campaign's goal to educate consumers about CarMax's flexible buying options, emphasizing that customers don't have to settle for a single buying method. The campaign aims to increase awareness of CarMax's best-in-class omnichannel experience.
Q: How is AI influencing your marketing strategy, particularly in terms of search engine optimization? A: William Nash noted the shift from traditional SEO to generative engine optimization (GEO), emphasizing the importance of adapting to new technologies to maintain visibility and effectiveness in marketing efforts.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
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