CarMax (NYSE:KMX) Reports Q2 In Line With Expectations

Max Juang /
2024/06/21 7:20 am EDT

Used automotive vehicle retailer Carmax (NYSE:KMX) reported results in line with analysts' expectations in Q2 CY2024, with revenue down 7.5% year on year to $7.11 billion. It made a GAAP profit of $0.97 per share, down from its profit of $1.44 per share in the same quarter last year.

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CarMax (KMX) Q2 CY2024 Highlights:

  • Revenue: $7.11 billion vs analyst estimates of $7.09 billion (small beat)
  • EPS: $0.97 vs analyst estimates of $0.95 (1.8% beat)
  • Gross Margin (GAAP): 11.1%, up from 10.6% in the same quarter last year
  • Free Cash Flow was -$221.6 million compared to -$322 million in the same quarter last year
  • Locations: 245 at quarter end, up from 240 in the same quarter last year
  • Same-Store Sales fell 6.1% year on year
  • (-16.2% in the same quarter last year)
  • Market Capitalization: $11.23 billion

“I am encouraged by the trends we saw in the first quarter including continued year-over-year price declines, improvements in vehicle value stability, and ongoing growth in upper funnel demand. We delivered strong retail, wholesale, and EPP gross profit per unit, sourced a record 35,000 vehicles from dealers, continued to actively manage SG&A, and repurchased over $100 million in shares of common stock. As CAF advances to a full-spectrum credit model, we launched our first non-prime asset-backed securitization deal early in the second quarter as part of the expansion of our securitization program that will enable incremental growth in finance income,” said Bill Nash, President and Chief Executive Officer.

Known for its transparent, customer-centric approach and wide selection of vehicles, Carmax (NYSE:KMX) is the largest automotive retailer in the United States.

Vehicle Retailer

Buying a vehicle is a big decision and usually the second-largest purchase behind a home for many people, so retailers that sell new and used cars try to offer selection, convenience, and customer service to shoppers. While there is online competition, especially for research and discovery, the vehicle sales market is still very fragmented and localized given the magnitude of the purchase and the logistical costs associated with moving cars over long distances. At the end of the day, a large swath of the population relies on cars to get from point A to point B, and vehicle sellers are acutely aware of this need.

Sales Growth

CarMax is one of the larger companies in the consumer retail industry and benefits from economies of scale, enabling it to gain more leverage on fixed costs and offer consumers lower prices.

As you can see below, the company's annualized revenue growth rate of 6.7% over the last five years was sluggish , but to its credit, it opened new stores and expanded its reach.

CarMax Total Revenue

This quarter, CarMax reported a rather uninspiring 7.5% year-on-year revenue decline to $7.11 billion in revenue, in line with Wall Street's estimates. Looking ahead, Wall Street expects sales to grow 1.5% over the next 12 months, an acceleration from this quarter.

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Same-Store Sales

Same-store sales growth is an important metric that tracks demand for a retailer's established brick-and-mortar stores and e-commerce platform.

CarMax's demand has been shrinking over the last eight quarters, and on average, its same-store sales have declined by 11% year on year. This performance is quite concerning and the company should reconsider its strategy before investing its precious capital into new store buildouts.

CarMax Year On Year Same Store Sales Growth

In the latest quarter, CarMax's same-store sales fell 6.1% year on year. This decrease was an improvement from the 16.2% year-on-year decline it posted 12 months ago. It's always great to see a business improve its prospects.

Key Takeaways from CarMax's Q2 Results

We enjoyed seeing CarMax exceed analysts' gross margin and EPS expectations this quarter. Overall, this quarter seemed fairly positive and shareholders should feel optimistic. The stock remained flat at $71.65 immediately following the results.

CarMax may have had a good quarter, but does that mean you should invest right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.