Carmax 1Q Profit Disappoints on Wholesale Slowdown

Carmax (NYSE:KMX) reported worse-than-expected first-quarter earnings on Thursday, as slightly higher average selling prices could not offset a major slowdown in wholesale demand.

The Richmond, Va.-based used-car retailer said earnings slipped 4% to $120.7 million, or 52 cents a share, compared with a year-earlier $125.5 million, or 54 cents.

The per-share results missed average analyst estimates in a Thomson Reuters poll by a penny.

Revenue for the three months ended May 31 climbed 4% to $2.77 billion from $2.68 billion a year ago, but missed the Street’s view of $2.81 billion. A 3% rise in unit sales, led partially by higher average selling prices, could not offset a 2% decline in wholesale unit sales and flat comparable sales.

The slowdown in wholesale follows two consecutive years of robust first-quarters growth, where unit sales increased 32% last year and 52% the year prior. Wholesale vehicle gross profit fell 5% to $81.9 million.

Still, Carmax CEO Tom Folliard said “solid execution resulted in strong used and wholesale gross profit per unit and higher CAF income.” CAF, or Carmax Auto Finance, income climbed 8% to $75.2 million during the quarter.

Shares of Carmax were down more than 5% to $26.47 Thursday.