CarMax net, same-store sales dip in latest quarter
CarMax Inc.’s net earnings eased 1.4 percent in the three months ending Nov. 30, as same-store sales fell, the company said today.
The used-car giant blamed competition from aggressive new-car deals, a smaller pool of older used vehicles and higher advertising expenses.
“We had a challenging third quarter due primarily to slightly negative used-unit” comparisons, CEO Tom Folliard said during a conference call with analysts and media detailing earnings for the fiscal third quarter.
He said the negative comparisons “were primarily the result of modestly lower traffic in our stores partially offset by better conversions.” In the quarter, used-vehicle sales at CarMax stores open for one year declined 0.8 percent from the year-earlier period.
Net profits eased 1.4 percent to $128.2 million, even as sales and operating revenues increased 4.1 percent to $3.54 billion.
Total retail used sales rose 3.2 percent to 143,673 vehicles.
CarMax opened one store each in the Houston and Minneapolis markets during the quarter.
Pressure from new
Folliard said aggressive promotions and lease deals on new vehicles from automakers put pressure on CarMax’s sales of late-model used vehicles.
In the quarter, pickups and large and midsize SUVs represented 23 percent of the company’s sales, down from 25 percent a year earlier, even as new-vehicle sales in those segments boomed. Folliard said the company passed up buying some of those vehicles because their prices at auction were higher than what CarMax buyers thought retail customers would swallow.
“There was a chance that we could have paid more. It’s not like the cars weren’t out there,” he said of the trucks. “But we’re always trying to deliver a great value to the consumer as well. There are always times when certain [vehicles] are at the auction that we think are just too expensive.”
CarMax also was hurt by a decrease in the industrywide volume of 5- to 10-year-old used vehicles, reflecting the plunge in new-vehicle sales during the recession.
Folliard said CarMax’s advertising cost in the quarter increased $9 million, reflecting the company’s brand-building ad campaign that started in September.
CarMax operated 153 used-vehicle stores in 76 markets as of Nov. 30. Since then, the company has entered the Boston market with two new stores.
CarMax’s stock price skidded on the news, falling 6.4 percent to close at $53.49 in a market that saw the Dow Jones Industrial Average slip 2.1 percent.
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