CarMax Inc.s first-quarter financial results exceeded some analysts expectations, as tough economic times kept the used-car market relatively healthy.
CarMax, the nations largest used-car retailer, actually increased profits per vehicle compared with a year ago, according to the companys earnings statement. Total gross profit per retail unit increased by $347 per unit to $2,911; total gross profit per used vehicle increased $259, to $2,001.
Net income for the quarter, which ended May 31, was off just 3 percent compared with the same period a year earlier, to $28.7 million. Sales dropped 17 percent to $1.8 billion.
Ratika Garg, an analyst with Frost & Sullivans Automotive Research, says CarMax held its own because weakened economic conditions are leading many consumers to choose used vehicles over new ones.
Garg added: The used-vehicle market remains much more stable in tough economic times.
CarMax CEO Tom Folliard said that although net profit fell, the company is pleased with its overall performance during the worst environment that our company has ever experienced.
Folliard made his comments today during a conference call with analyststoday.
He said CarMax greatly improved its sales execution in the quarter, partially offsetting the decline in customer traffic.
The companys decision to suspend store expansion plans announced in January helped contain costs, Folliard said. The company also slashed advertising spending 30 percent, decreased per-vehicle reconditioning costs by $100 and increased service department sales 9 percent.
CarMaxs captive finance company, CarMax Auto Finance, lost $21.6 million in the quarter.
CarMax sold 92,863 used vehicles in the quarter, down 13 percent from the year-ago quarter. It sold 2,031 new vehicles in the quarter, down 42 percent from the year-ago period.
The company is 26th in the Automotive News ranking of public dealership groups, with 15,485 total new-vehicle sales in 2008. The company sold 377,244 used vehicles in the 12-month period that ended Feb. 29.
Reuters contributed to this report.>