CarMax Q3 profit rises on surge in used-car supply, consumer confidence
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(Reuters) -- CarMax Inc., the largest U.S. used-car retailer, reported a stronger third-quarter profit as a rise in supply, more attractive financing options and improved customer sentiment helped it sell more vehicles to retail clients.
Net income rose to $94.7 million, or 41 cents per share, in the third quarter from $82.1 million, or 36 cents per share, a year earlier, CarMax said today.
CarMax's shares surged almost 9 percent on the New York Stock Exchange, closing at $37.97 -- the highest price since the company's 1997 initial public offering, Bloomberg reported. The stock has gained more than 40 percent since touching a year-low in June, Bloomberg said.
Used-car supplies have improved after a shortage over the previous few quarters as customers ditch their old cars in favor of more recent used models and new ones, the company said.
"We believe consumer sentiment has improved somewhat, which may be resulting in more engaged customers in our stores," CEO Thomas Folliard said on a conference call.
Chief Financial Officer Thomas Reedy said customers have also become more responsive to low interest rates, leading to increased sales as well as fewer "payoffs", in which customers sell their car to CarMax but don't buy a replacement.
Sales in the company's wholesale business rose for the first time in three quarters. The business sells cars that don't meet its retail standards to licensed dealers.
Used vehicle sales to retail customers rose 17 percent to $2.07 billion in the quarter, while wholesale sales rose 10 percent to $427.7 million. Total sales rose 15 percent to $2.60 billion.
Oppenheimer & Co analyst Brian Nagel said he believed the results represented the start of a long-awaited sales recovery for the company.
Bloomberg contributed to this report.
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