CarMax, the nation's largest used car retailer, reported blowout fiscal first-quarter results amid soaring prices as the market for used cars booms. CarMax stock jumped Friday.
CarMax Earnings
Estimates: Wall Street expected CarMax earnings to soar from 3 cents per share in the year-ago, pandemic-hit quarter to $1.63, according to FactSet. Revenue is seen vaulting 92% to $6.18 billion, after crumbling 40% in the year-ago quarter.
Results: CarMax earnings shot up to $2.63 a share. Sales soared 138% to $7.7 billion and rose 43% vs. two years earlier.
Retail used unit sales increased 100.6% to 270,799 vehicles, with comparable used-car sales up 99.1%. Total used vehicle revenues increased 121%, with average retail selling prices rising more than $2,000.
CarMax bought 341,275 vehicles from consumers, a 236% spike. Acquiring inventory has grown more expensive as well for CarMax and other dealers.
The market for used cars is booming. Firstly, new cars are scarce amid the global chip shortage. Secondly, car rental companies bought up used cars after selling off fleets during the pandemic.
Early in fiscal Q1, management spoke of "healthy demand for used vehicles." Stimulus checks began to go out in April, while vaccination rates climbed.
According to the Labor Department, used-car prices jumped nearly 30% between May 2020 and May 2021.
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CarMax Stock
Shares popped 6.7% to close at 127.40 on the stock market today, gapping above the 50-day line. CarMax stock is forming a cup base with a 138.87 buy point but is well below the entry for now, according to MarketSmith chart analysis. The KMX stock base has formed almost entirely below the 50-day line
Among other used-car stocks, Carvana fell 1.4% and Shift Technologies lost 2%. AutoNation, which sells both used and new cars, climbed 2.4%.
The used-car retailer said it opened two locations in Q1 with plans for 10 for all of fiscal 2022. On May 6, CarMax said it expected to open 8-10 stores annually over the next five years vs. 13-15 stores in prior years. And future new stores would be smaller, CarMax said.
Meanwhile, the Virginia-based company has made e-commerce sales a strategic focus. Consumers are shifting to buying even vehicles online, while digital upstarts Carvana and Shift Technologies are nipping at its heels.
Amazon is a looming threat. The e-commerce giant launched a hub for researching used cars several years ago, though it's not a platform for buying and selling yet.
Find Aparna Narayanan on Twitter at @IBD_Aparna.
