Earnings Results:
- Total sales of $5.6 billion, down 2% YoY driven by lower retail/wholesale prices and lower wholesale volume, partially offset by higher retail volume
- Net earnings per diluted share of $0.32 vs $0.44 a year ago
- Used unit sales increased 1.3%, comps up 0.1%
- Retail GPU of $2,251, relatively flat YoY
- Wholesale unit sales down 4%, GPU of $1,120 slightly down from $1,187 a year ago
- CarMax Auto Finance income of $147M, up 19% driven by lower loan loss provision
Guidance / Future Outlook:
- Extending timeframe for long-term goal of selling 2M+ units annually to between FY2026-FY2030 due to economic uncertainty
- Expect to achieve $33B revenue target and 5%+ market share of 0-10 year old vehicles sooner than unit sales target
- Expect Service to see significant YoY improvement in FY2025
- Plan to modestly accelerate share repurchases
- Plan to open 5 new stores, a reconditioning center and an auction facility in FY2025
Themes and Trends:
- Consumer affordability remains a headwind but is improving; prices declined and retail/wholesale GPUs held up well
- Self-sufficiency over 70%, a positive trend; buying more cars from consumers/dealers, less reliance on auctions
- Focusing on increasing operational efficiencies across the organization to manage costs
- Investing in digital capabilities and AI to optimize customer experience
- Expanding omnichannel offerings and growing “omni” sales
Market Conditions:
- Total used vehicle market expected to be flat to slightly up in 2023
- Pricing volatility remains high but CarMax sees trend normalizing more towards historical depreciation patterns
- Interest rates stabilizing a positive, but payment affordability still a challenge for many consumers
- Some near-term choppiness in demand quarter-to-date with prolonged tax refund season
Sentiment: The overall sentiment of the call was cautiously optimistic. Management acknowledged challenges remain with consumer affordability and economic uncertainty, leading them to take a conservative approach in extending their long-term unit sales target. However, they highlighted sequential improvements in the business with stable margins, strong CAF performance, and cost management efforts. CarMax seems to be positioning itself well for the long-term through digital investments, growing omnichannel sales, expanding vehicle sourcing, and focusing on profitable market share gains. While near-term demand remains choppy, the company sees positive underlying trends and expects to capitalize as the market recovers.