DETROIT -- CarMax Inc.'s net income more than tripled during its most recent quarter that ended May 31.
But floor traffic and sales are still below pre-recession levels, CarMax President Tom Folliard cautioned today. He said the high unemployment rate and concern about the economy are keeping many consumers out of the market.
“Though the market is back, it's not back to where it was two years ago,” Folliard told analysts during a conference call. “Consumers are still nervous about going out and signing up for a loan. Almost everything we sell requires a loan. There is still a lot of uncertainty out there.”
The used-car retailer reported net earnings of $101.1 million in the quarter that ended May 31, compared with $28.7 million earned in the year-ago quarter. The company's revenue grew to $2.26 billion from $1.83 billion in the same period last year.
Its finance arm, CarMax Auto Finance, reported income of $57.5 million compared with a loss of $21.6 million in the same period last year.
Keith Browning, CarMax CFO, said CarMax Finance benefited from lower charge-off rates, high loan recovery rates relative to historical norms, and historically high spreads between the rates charged to consumers and the finance company's funding costs.
“Losses were actually 30 percent below our projections,” Browning says of the finance company's results for the quarter.
CarMax sold 100,925 used cars and trucks in the quarter, a 9 percent increase over sales in the same period last year. Used-vehicle sales at stores open for one year also were up by 9 percent.
The company sold 2,134 new vehicles in the quarter, up 5 percent when compared with the same period last year.
Folliard said CarMax was helped in the quarter by its ability to buy more of its used-vehicle inventory from consumers, which is typically less expensive than buying from auctions.
In the quarter, CarMax purchased close to 40 percent of the consumer-owned vehicles it appraised, Folliard says. That is still below the “over 50 percent” it purchased before the recession but above the 30 percent low point it experienced over the last two years, he adds.
CarMax operates 103 used-car superstores and five new-car dealerships in 49 markets.
In related news, Standard & Poor's ratings service said it will add CarMax to the S&P 500 stock index after the close of trading on Friday.