CarMax Inc. reported higher retail sales and profits in its fiscal first quarter, despite a difficult overall environment for used-vehicle sales.
CEO Austin Ligon said lower wholesale prices for used cars and trucks made it less costly for the public dealership group to acquire inventory. CarMax's first quarter ended May 31.
Ligon spoke during a Monday, June 19, conference call before he retired last week. Thomas Folliard, CarMax's former executive vice president of store operations, took over as CEO on Wednesday, June 21.
The Richmond, Va., company reported net earnings of $56.8 million in the first quarter of 2006, a 54 percent increase over the year-ago quarter. Total first-quarter sales rose 19 percent, to $1.89 billion.
CarMax said its gross profit per used vehicle rose 11.1 percent over the first quarter of 2005, to $1,924. Its gross profit per new vehicle rose 5.1 percent, to $1,215.
Unit sales at CarMax stores that have been open for at least a year rose 6 percent over the year-ago quarter. The company sold 84,266 used vehicles in the quarter, up 13.7 percent from the year-ago period.
At the same time, first-quarter new-car sales declined 11.7 percent, to 4,947 vehicles. Ligon attributed the drop to softer new-car sales overall and to CarMax's strategy of increasing its gross margins on new cars and trucks.
Ligon said he expects sales at CarMax stores that have operated at least a year to grow 2 to 8 percent this fiscal year, which began March 1. But he said domestic automakers' new-vehicle pricing strategies could affect overall results.
Heavy discounting of new vehicles hurts prices of late-model used vehicles, the segment in which CarMax specializes.
The company opened four stores in the first quarter - two in the Columbus, Ohio, market and one each in Hartford, Conn., and Oklahoma City.
The company plans to open seven more stores this fiscal year. It also plans a smaller test store in Charlottesville, Va., that will stock about 150 used vehicles. A standard CarMax store typically stocks 350 to 500 vehicles.
In April, CarMax opened a store in Atlanta that buys used vehicles from consumers but does not sell them. Ligon says it is too early to draw conclusions about the store.
"We're happy so far, but we need to get several months under our belt," he says.
CarMax ranks No. 19 on Automotive News' list of the 100 largest dealership groups. The company operated 67 stores at the end of 2005.
You may e-mail Arlena Sawyers at [email protected]