CarMax (NYSE:KMX) reported a decline in fourth-quarter earnings and revenue, missing Wall Street estimates and sending its shares down 7.6% premarket. The auto retailer posted adjusted earnings per share (EPS) of $0.32, falling short of the analyst consensus of $0.46. Revenue also came in below expectations at $5.6 billion, compared to the projected $5.79 billion.
In comparison to the same quarter last year, net revenues decreased by 1.7%. The company experienced a modest increase in retail used unit sales of 1.3% and a slight uptick in comparable store used unit sales of 0.1%. However, wholesale units saw a decline of 4.0%. CarMax cited vehicle affordability challenges, heightened by inflationary pressures, higher interest rates, and low consumer confidence, as factors impacting sales performance.
Gross profit per retail used unit was $2,251, and wholesale units were $1,120, both showing a slight decrease from the prior year's strong fourth quarter. The company bought 234,000 vehicles from consumers and dealers, which is a 10.8% decrease from the same period last year. Despite these challenges, CarMax Auto Finance (CAF) income grew by 18.9% due to a lower provision for loan losses and an increase in average managed receivables.
Bill Nash, president and chief executive officer, commented on the results, "We are encouraged by the performance of our business during the fourth quarter. We reported growth in total used unit sales and comps, delivered strong retail and wholesale gross profit per unit, continued to actively manage SG&A and grew CAF income significantly year-over-year."
The company's focus on enhancing its omni-channel experience and leveraging data science, automation, and AI has fortified its operational foundation, according to Nash. Despite the reported earnings and revenue miss, CarMax is optimistic about its positioning for future growth.
Investors reacted negatively to the earnings release, with the stock price reflecting concerns over the company's ability to meet market expectations. The downward movement in the stock price post-earnings suggests that the market is weighing the near-term challenges more heavily than the company's strategic initiatives.