CarMax Group, facing another year of red ink, has scaled back expansion plans for 1999. CarMax said it will report a loss of about three cents per share for its first quarter of fiscal 1999, which ended May 31.
The Richmond, Va., used-car superstore chain, a subsidiary of Circuit City Stores Inc., said it may not turn a profit during fiscal 1999, contrary to its earlier predictions.
CarMax now plans to open just 10 stores this fiscal year, rather than the 15 to 20 originally scheduled. Six or seven of those stores will be in Los Angeles.
The company posted sales of $34.5 million for its first quarter, ended May 31, up 111 percent from a year ago. Richard Sharp, Circuit City's chairman, blamed continued new-car incentives from manufacturers for sluggish used-car sales. Same-store sales at CarMax stores increased 5 percent in May after a 9 percent decline in April. CarMax currently operates 21 superstores.
Despite the disappointing news, Kenneth Gassman, a retail analyst for Davenport & Co. in Richmond, Va., says CarMax is positioning itself to make a profit in fiscal 2000.
'I think the superstore model is viable,' Gassman said. 'The problem is nobody has made a lot of money with it yet. We know it'll sell cars. We don't know if it will make a profit.'
Art Spinella, general manager
of CNW Marketing/Research in Bandon, Ore., does not share Gassman's optimism, noting that CarMax is struggling even in a booming economy.
Said Spinella: 'Any kind of economic slowdown will really set their teeth on edge.'