Key Takeaways
- CarMax reported a Q4 net loss of $120.7 million, equivalent to 85 cents per diluted share, primarily due to a $141.3 million goodwill impairment.
- Shares declined 6.8% during premarket hours on Tuesday following the earnings release.
- On an adjusted basis, EPS reached $0.34, surpassing the Street’s $0.18 consensus; quarterly revenue of $5.95 billion exceeded the $5.65 billion forecast.
- Gross profit per retail used vehicle declined to $2,115 from $2,322 year-over-year; wholesale unit profitability slipped to $940 from $1,045.
- The company outlined expansion plans including four new retail locations and four reconditioning centers in fiscal 2027, with projected capital spending near $400 million.
Shares of CarMax (KMX) tumbled 6.8% in premarket activity Tuesday following the used vehicle retailer’s announcement of a fourth-quarter net loss, weighed down by a substantial $141.3 million goodwill impairment.
The Virginia-headquartered automotive retailer disclosed a quarterly loss totaling $120.7 million, translating to a loss of 85 cents per diluted share. This marks a stark reversal from the prior-year quarter when the company generated net income of $89.9 million, or 58 cents per share.
However, excluding the non-cash goodwill charge, the financial results painted a more favorable narrative. CarMax’s adjusted earnings per share reached 34 cents — nearly double the 18-cent consensus forecast from Wall Street analysts.
CarMax, Inc., KMX
Quarterly revenue totaled $5.95 billion, representing a modest 1% decline compared to the same period last year, yet comfortably exceeding analyst projections of $5.65 billion.
The goodwill impairment wasn’t unexpected for market observers. CarMax attributed the writedown to a significant decrease in its market capitalization, underwhelming financial results throughout fiscal 2026, and adjustments to its forward-looking financial projections.
Profitability Per Unit Continues Decline
Per-vehicle profitability remained under significant pressure. The company’s retail gross profit margin per used vehicle contracted to $2,115 during the quarter, compared to $2,322 in the year-ago period. Similarly, wholesale gross profit per unit decreased to $940 from $1,045 year-over-year.
CarMax implemented pricing reductions to accelerate inventory turnover. The strategy yielded modest results — wholesale unit volume increased 3% to 122,781 vehicles. However, average wholesale selling prices declined approximately $270 per vehicle, offsetting much of the volume benefit.
Retail used vehicle units sold decreased 0.8% year-over-year to 181,188 vehicles. On a comparable store basis, sales fell 1.9%. Average retail transaction prices dropped roughly $110 per unit.
Total combined volume across retail and wholesale channels remained essentially unchanged, rising just 0.7% to 303,969 units.
Consumer purchasing behavior has added another headwind. Gasoline prices lingering around $4 per gallon have dampened consumer confidence and altered buying preferences. This macroeconomic pressure has accelerated interest in electric and hybrid vehicles, reshaping demand dynamics throughout the pre-owned vehicle marketplace.
Leadership Change Brings Strategic Pivot
Newly appointed President and CEO Keith Barr utilized his inaugural quarterly earnings call to outline a strategic recalibration.
Barr emphasized that the company’s objective is establishing CarMax as “the obvious choice for customers” by delivering aggressive pricing, maintaining substantial inventory depth, and enhancing the overall transaction experience from browsing to delivery.
Looking toward fiscal 2027, CarMax announced plans to launch four additional retail stores alongside four new vehicle reconditioning and auction centers. The company anticipates capital expenditures will approximate $400 million for the coming fiscal year.
The company’s fourth-quarter revenue of $5.95 billion represented a 1% year-over-year decline.
Full-year adjusted earnings per share contracted to 34 cents from 64 cents in the previous fiscal year, underscoring the sustained margin headwinds affecting all business segments.
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Source: https://blockonomi.com/carmax-kmx-stock-tumbles-6-8-despite-beating-estimates-on-tightening-vehicle-margins/
