CarMax Q2 Profit Up 11%, Beats View; But Revenues Miss

(RTTNews) - Used vehicles retailer CarMax, Inc. (KMX) on Tuesday reported an 11 percent increase in profit for the second quarter from last year, reflecting higher revenues and improved margins. Adjusted earnings per share for the quarter beat analysts' expectations, while revenues missed their estimates.

Tom Folliard, president and chief executive officer of CarMax said, "The continued expansion of our store base and growth across our used, wholesale and CAF operations, as well as our share repurchase program, all contributed to our record second quarter earnings per share."

The Richmond, Virginia-based company's net earnings for the second quarter was $172.23 million or $0.82 per share, up from $154.52 million or $0.70 per share in the prior-year quarter.

The latest quarter's results included a $0.03 per share benefit related to a change in timing of the company's recognition of reconditioning overhead costs. The prior-year quarter's results included a $0.06 per share benefit from the receipt of settlement proceeds in a class action lawsuit.

Excluding these items, adjusted earnings for the quarter were $0.79 per share, compared to $0.64 per share in the prior-year quarter.

On average, 16 analysts polled by Thomson Reuters expected the company to report earnings of $0.76 per share for the quarter. Analysts' estimates typically exclude special items.

Net sales and operating revenues for the quarter increased 7.9 percent to $3.88 billion from $3.60 billion in the same quarter last year, but missed analysts' consensus estimate of $3.96 billion.

Used vehicle sales for the quarter rose 7.9 percent from last year to $3.15 billion and accounted for 81.1 percent of CarMax's total revenues, while wholesale vehicles sales increased 11.6 percent to $591.8 million.

New vehicle sales declined 13.5 percent from the year-ago period to $60.5 million, while total other sales and revenues rose 4.6 percent to $82.4 million.

Comparable store used vehicle revenues for the quarter grew 3.3 percent, with comparable store used unit sales increasing 4.6 percent, driven by improved conversion.

Total used vehicle unit sales rose 9.2 percent, while new vehicle unit sales declined 12.9 percent.

Total wholesale vehicle unit sales increased 8.7 percent, benefiting from the growth in the company's store base and a calendar shift that resulted in one extra Monday auction date compared with the year-ago period.

The company held a majority of its wholesale auctions on Mondays. Excluding the extra Monday, wholesale vehicle unit sales would have increased about 5 percent year-over-year.

Income at the company's auto-finance unit, CarMax Auto Finance or CAF, grew 6.2 percent from the year-ago quarter to $98.3 million, reflecting an increase in average managed receivables that was partly offset by a lower total interest margin percentage.

Gross margin expanded 50 basis points from last year to 13.4 percent.

Looking ahead, CarMax affirmed its outlook for total capital expenditures of about $360 million in fiscal 2016. The company continues to expect to open 14 stores and relocate one store whose lease is expiring in fiscal 2016, as well as open between 13 and 16 stores in each of the following two fiscal years.

KMX is trading at $59.00, down $3.66 or 5.84 percent on a volume of 2.57 million shares.