CarMax Stalls As Q1 Profit Goes The Wrong Way

CarMax’s latest quarter showed that the used-car market is moving again, but profit still got more than a little banged up. The used-car retailer reported fiscal first-quarter revenue of $8.0 billion, up 6.2% from a year earlier, while combined retail and wholesale unit sales rose 3.3% to 392,357 vehicles. Earnings slipped to $1.31 per diluted share from $1.38 a year earlier. Shares fell about 9% Wednesday, as investors looked past the revenue gain and focused on a turnaround that still has quite a few dents and scrapes.

CarMax did indeed sell cars, but too much profit was burned to keep the lot moving. Comparable store used-unit sales fell 0.8%, even as total retail used-unit sales increased slightly to 230,293 vehicles. Retail used-vehicle revenue rose 4.7%, helped by a higher average selling price, but retail gross profit per used vehicle fell $230 to $2,177. That is the quarter’s backward math — CarMax is trying to win back demand in a still-stretched affordability environment, but the pricing actions helping sales also keep dinging the profit investors want to see recover.

The company is working on the right parts of the business, even if the payoff is not visible yet. SG&A expenses fell 3.7% to $635.2 million, and SG&A per total unit improved by $118 to $1,619. CarMax said it remains on track to reach $200 million in exit-rate SG&A savings by the end of fiscal 2027, while new CEO Keith Barr laid out a strategy focused on better pricing, selection, reconditioning, logistics, and the online-to-store experience. That gives Wall Street a repair manual, but not an actual finished repair. CarMax still has the scale to benefit if used-car demand improves, but until gross profit per vehicle stops sliding, higher sales will just look like the company driving past the Wrong Way sign.

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