Post Earnings Coverage on Vehicle Retailer CarMax

LONDON, UK / ACCESSWIRE / June 22, 2016 / ActiveWallSt.com announces its post-earnings coverage on CarMax, Inc. (NYSE: KMX). The company announced its first quarter fiscal 2017 earnings results on Tuesday, June 22, 2016. Results did not live up to market expectation as the Richmond, Virginia-based vehicle retailer reported a 3.6% decline in net income due to slower growth rate and higher selling, general and administrative expenses (SG&A). Register with us now for your free membership and see our complete earnings coverage on this equity at:

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Earnings Review

For the quarter ended on May 31, 2016, CarMax reported earnings of $0.90 as compared to earnings of $0.86 in Q1 FY17, missing the consensus estimate of $0.93. The company earned $4.13 billion during Q1 FY17 as compared to revenue of $4.01 billion in the year ago period, missing analysts’ estimates of $4.24 billion.

CarMax reported that comparable used-car sales, measured in terms of units sold, grew marginally by 0.2% on y-o-y basis. The number of total sales of used cars grew by 4%, primarily attributed to expansion in CarMax’s store network. Wholesale unit sales were up 1.8% on y-o-y basis. Total gross profit increased 5.3% to $572.6 as compared to Q1 FY16. CarMax Auto Finance income declined 7.7% on y-o-y basis to $100.8 million, primarily attributed to increase in provision for loan losses and a lower total interest margin percentage.

CarMax reported that SG&A expenses increased 8.7% due to store expansion and an increase in share-based compensation. The company also said that interest expense rose $11.1 million on y-o-y basis. In Q1 FY17, sales of extended protection plans increased by 6%, while third-party finance fees climbed 29.8% on y-o-y basis; this was, however, offset by a decline in sales of new vehicles, which put the overall other-sales category figure down 10.9% as compared to Q1 FY16.

Forecast and Share Repurchase

CarMax opened two stores in new markets and plans to open 17 new stores over the next 12 months, including four stores in Q1FY18. During Q1 FY17, CarMax repurchased 2.6 million shares of common stock worth $132.0 million as per its share repurchase program. As of May 31, 2016, the company had $1.27 billion remaining available under the repurchase program.

Stock Performance

CarMax shares dropped 4.92% closing at $48.14 on June 22, 2016, after the company posted its earnings result. The stock has steadily declined in the past year amid increased competition in the used car industry. The company’s share has declined 4.10% in the past three months.

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