CarMax Inc (NYSE: KMX) breached its 52-week low on Thursday after the firm’s second-quarter results were hit by weaker retail sales and higher loan loss provisions, leading to earnings and revenue misses.
The used-car retail giant reported second-quarter earnings per share of 64 cents, missing the analyst consensus estimate of $1.09.
Quarterly sales of $6.594 billion (down 6% year over year) missed the Street view of $7.024 billion.
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CarMax Auto Finance, or CAF, reported income of $102.6 million, down 11.2%. The decline came as higher loan loss provisions offset gains in net interest margins. CAF’s total interest margin percentage was 6.6% of average auto loans outstanding, up 50 basis points from the prior year’s second quarter.
CarMax said combined retail and wholesale used vehicle unit sales fell 4.1% in the second quarter to 338,031.
Retail used vehicle unit sales declined 5.4% to 199,729, with comparable store used unit sales down 6.3%. Retail used vehicle revenues dropped 7.2%, reflecting fewer units sold.
Wholesale vehicle unit sales slipped 2.2% to 138,302. Wholesale revenues edged down 0.4%, as lower unit volume was partially offset by a $125, or 1.6%, increase in the average wholesale selling price.
Other sales and revenues decreased 4.2%, or $7.6 million, mainly on lower extended protection plan revenues tied to weaker retail unit sales.
The company bought 293,000 vehicles in total in the second quarter, a 2.4% decrease. Of these, 262,000 came from consumers (down 2.7%) and 31,000 from dealers (up 0.2%).
“While this was a challenging quarter, we remain confident in our long-term strategy and the strength of the earnings model that we have built,” said Bill Nash, president and chief executive officer.
Total gross profit was $717.7 million, down 5.6% versus last year’s second quarter. Unit margins remained solid, with gross profit of $2,216 per retail used unit and $993 per wholesale unit.
Extended Protection Plans generated $576 margin per retail unit, roughly matching last year’s second quarter.
During the second quarter, the firm opened three new store locations in Tuscaloosa, Alabama, El Cajon, California, and Hagerstown, Maryland.
It also opened a stand-alone reconditioning/auction center in New Kent County, Virginia, to support the Richmond metro market.
Quarterly SG&A expenses decreased 1.6% to $601.1 million compared to the prior-year quarter. “We will continue to drive SG&A efficiency, targeting at least $150 million in incremental SG&A reductions over the next 18 months,” the CEO added.
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