CarMax Q1 Results Fail To Satisfy Investors

CarMax, Inc KMX announced 3.6 percent drop in profit for the first quarter despite net sales and operating revenues witnessing 2.8 percent growth fuelled by 0.2 percent increase in used unit sales in comparable stores. The results also came in below the Street analysts expectations.

CarMax reported net earnings of $175.4 million for the first quarter, down 3.6 percent from $181.97 million in the year-ago quarter. However, its earnings per share grew 4 percent to $0.90 from $0.86 in the same quarter last year. Street analysts expected the company to report $0.92 a share.

The company's top line advanced 2.8 percent to $4.13 billion from $4.01 billion in the previous year quarter. This also missed the Street estimations of $4.19 billion.

Its statement said, "Total used vehicle unit sales grew 4.0% and comparable store used unit sales rose 0.2% versus the prior year's first quarter. The comparable store sales performance reflected the combination of an improvement in conversion that more than offset a decrease in store traffic. Our sales performance included a reduction in the Tier 3 sales mix to 11.9% of used unit sales from 14.7% in the prior year's first quarter."

The company continued, "Tier 3 sales represent those financed by our Tier 3 third-party finance providers (those to whom we pay a fee) and those in CAF's Tier 3 loan origination program. For the non-Tier 3 customer base, comparable store used unit sales rose 3.6%.
Wholesale vehicle unit sales grew 1.8 percent versus the first quarter of fiscal 2016, primarily driven by the growth in our store base."

CarMax said in the first quarter, it repurchased 2.6 million shares of common stock for $132.0 million following its share repurchase program. At the end of May, the retailer had $1.27 billion remaining for repurchase under the program.

In the pre-market, the stock traded down by 5.18 percent.