CarMax is gearing up for store growth
Up to 43 more are expected to open in next 3 years
In the fiscal year that ended Feb. 28, CarMax' unit sales jumped 18 percent to 526,929.
Photo credit: BLOOMBERG
The nation's largest used-vehicle retailer opened two used-car stores in March and plans to open 28 to 43 more by the end of February 2017, its top executive said.
Last month, CarMax Inc. opened stores in Rochester, N.Y., and Dothan, Ala., bringing its store count to 133. It added 13 stores in the fiscal year that ended Feb. 28 and grew its unit sales 18 percent to 526,929.
It was the first time the company's sales exceeded 500,000 vehicles in a single fiscal year.
"We're in full swing now," CarMax CEO Tom Folliard said this month during a conference call outlining the company's fiscal fourth-quarter and full-year earnings. "We opened 13 stores this year, and we plan to open another 10 to 15 for the next three, also."
The Dothan store is CarMax's third small-format store, Folliard said. It is 4,400 square feet, occupies approximately 3.7 acres and stocks about 120 used cars and trucks, the company said.
Last year, a CarMax spokeswoman told Automotive News that a small-format store is approximately 7,000 square feet, with about 150 used cars and trucks on its lot.
Traditional CarMax stores are 15,000 to 45,000 square feet with 250 to 300 vehicles in their inventories. But a store opened in February in Sacramento, Calif., is "more than" 56,000 square feet and stocks "approximately 440" used vehicles, a press release notes.
Folliard said it is too early to know which practices at its three smaller stores can be implemented into CarMax's more traditional-sized stores, but he believes there will be opportunities for cross-training and labor-sharing at other stores. He also said the smaller stores are leveraging inventory by speeding the transfer of vehicles among stores to give customers access to more inventory than is located at those stores.
"In our higher-volume stores, if you are a buyer or you are in the business office or you are in sales, you can stay busy doing that one thing, whereas in one of these smaller stores, you really have to be able to do multiple things, and that's true for both commission associates and hourly associates," Folliard said.
CarMax CEO Tom Folliard: "We're in full swing now."
Through February, CarMax plans to open stores in Mechanicsburg, Pa.; Madison, Wis.; Fort Worth, Texas; Lynchburg, Va.; Milwaukie and Beaverton, Ore.; Saltillo, Miss.; Reno, Nev.; Raleigh, N.C.; and Warrensville Heights, Ohio.
A store in Spokane Valley, Wash., is scheduled to open in May, the company said.
Also during the call, CFO Tom Reedy said the company's captive finance arm began a test in January to learn more about financing customers it typically would have handed off to a subprime lender.
"During the quarter, we originated $9 million" in loans, he said of the test. "It is very early in the process, and we will share information and learnings once it is appropriate."
For its fiscal year, CarMax's net income rose 13 percent to $492.6 million, as revenues increased 15 percent to $12.57 billion.
Revenues in the fiscal fourth quarter increased 9 percent to $3.08 billion, but net income fell 7 percent to $99.2 million.
The company attributed the earnings decline to an accounting correction related to an increase in cancellation reserves for extended service plan and guaranteed asset protection products.
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