CarMax shares fell more than 6% in early trade on Wednesday as investors focused on margin pressure and credit risks despite better-than-expected first quarter earnings. The used-vehicle retailer reported adjusted earnings per share of $1.31, well above analyst estimates of $0.95, and revenue increased 6.2% year over year to $8.01 billion, topping consensus expectations of about $7.4 billion. Combined retail and wholesale vehicle sales rose 3.3% to 392,357 units, but comparable-store used-vehicle sales declined 0.8%. Gross profit per retail used vehicle fell $230 year over year to $2,177 as the company continued pricing actions aimed at supporting sales growth, marking several consecutive quarters of margin compression. Concerns also centered on credit quality within CarMax Auto Finance, where income declined 1% to $140.2 million and penetration increased to 43.3% from 41.8% a year earlier, raising caution about rising loan delinquency risks and exposure to lower-tier borrowers. The report was the first under new CEO Keith Barr, who outlined a four-pillar strategic framework to drive unit sales and earnings growth while improving shareholder returns.
CarMax IncGross profit per retail used vehicle fell $230 year over year due to pricing actions to support sales, indicating margin compression.