CarMax Q2 Revenue Down, Earnings Per Share Decline

Ticker: KMX · Form: 10-Q · Filed: 2024-09-27T00:00:00.000Z

Sentiment: bearish

Topics: earnings, revenue-decline, automotive-retail

Related Tickers: Vroom, Carvana, Lithia Motors, AutoNation

TL;DR

CarMax Q2 revenue down to $5.08B, EPS $0.50 vs $0.77 last year. Tough market.

AI Summary

CarMax Inc. reported its second quarter results for fiscal year 2025, ending August 31, 2024. Total net sales and operating revenues for the quarter were $5.08 billion, a decrease from $6.47 billion in the same period last year. The company's net earnings per diluted share were $0.50, down from $0.77 in the prior year's second quarter.

Why It Matters

This filing indicates a challenging quarter for CarMax, with significant drops in both revenue and earnings, potentially signaling broader trends in the used car market.

Risk Assessment

Risk Level: medium — The decline in revenue and earnings per share suggests potential headwinds in the automotive retail sector that could impact future performance.

Key Numbers

Key Players & Entities

FAQ

What were CarMax's total net sales and operating revenues for the second quarter of fiscal year 2025?

CarMax's total net sales and operating revenues for the second quarter of fiscal year 2025, ending August 31, 2024, were $5.08 billion.

How did CarMax's net earnings per diluted share in Q2 FY2025 compare to Q2 FY2024?

CarMax's net earnings per diluted share were $0.50 in the second quarter of fiscal year 2025, a decrease from $0.77 in the same period of fiscal year 2024.

What was the reporting period for this 10-Q filing?

The reporting period for this 10-Q filing was August 31, 2024.

What is CarMax Inc.'s fiscal year end?

CarMax Inc.'s fiscal year ends on February 28th (0229).

What was the total net sales and operating revenue for the comparable prior year quarter?

The total net sales and operating revenue for the second quarter of fiscal year 2024 was $6.47 billion.

Filing Stats: 4,659 words · 19 min read · ~16 pages · Grade level 9.4 · Accepted 2024-09-27 14:28:39

Key Financial Figures

Filing Documents

FINANCIAL INFORMATION

PART I. FINANCIAL INFORMATION

Financial Statements

Item 1. Financial Statements: Consolidated Statements of Earnings (Unaudited) – Three and Six Months Ended August 31, 2024 and 2023 3 Consolidated Statements of Comprehensive Income (Unaudited) – Three and Six Months Ended August 31, 2024 and 2023 4 Consolidated Balance Sheets (Unaudited) – August 31, 2024 and February 29, 2024 5 Consolidated Statements of Cash Flows (Unaudited) – Six Months Ended August 31, 2024 and 2023 6 Consolidated Statements of Shareholders' Equity (Unaudited) – Three and Six Months Ended August 31, 2024 and 2023 7

Notes to Consolidated Financial Statements (Unaudited) 9

Notes to Consolidated Financial Statements (Unaudited) 9

Management's Discussion and Analysis of Financial Condition and

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 27

Quantitative and Qualitative Disclosures About Market Risk 43

Item 3. Quantitative and Qualitative Disclosures About Market Risk 43

Controls and Procedures 43

Item 4. Controls and Procedures 43

OTHER INFORMATION

PART II. OTHER INFORMATION

Legal Proceedings 44

Item 1. Legal Proceedings 44

Risk Factors 44

Item 1A. Risk Factors 44

Unregistered Sales of Equity Securities and Use of Proceeds 44

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 44

Exhibits 45

Item 6. Exhibits 45 SIGNATURES 46 Page 2

FINANCIAL INFORMATION

PART I. FINANCIAL INFORMATION

FINANCIAL STATEMENTS

ITEM 1. FINANCIAL STATEMENTS CARMAX, INC. AND SUBSIDIARIES Consolidated Statements of Earnings (Unaudited) Three Months Ended August 31 Six Months Ended August 31 (In thousands except per share data) 2024 % (1) 2023 % (1) 2024 % (1) 2023 % (1) SALES AND OPERATING REVENUES: Used vehicle sales $ 5,677,081 80.9 $ 5,591,143 79.0 $ 11,354,557 80.4 $ 11,592,614 78.5 Wholesale vehicle sales 1,154,465 16.5 1,321,975 18.7 2,410,904 17.1 2,836,338 19.2 Other sales and revenues 181,983 2.6 160,718 2.3 361,465 2.6 331,947 2.2 NET SALES AND OPERATING REVENUES 7,013,529 100.0 7,073,836 100.0 14,126,926 100.0 14,760,899 100.0 COST OF SALES: Used vehicle cost of sales 5,198,315 74.1 5,139,034 72.6 10,380,294 73.5 10,625,880 72.0 Wholesale vehicle cost of sales 1,016,590 14.5 1,185,359 16.8 2,115,901 15.0 2,531,897 17.2 Other cost of sales 38,157 0.5 52,678 0.7 78,369 0.6 88,967 0.6 TOTAL COST OF SALES 6,253,062 89.2 6,377,071 90.2 12,574,564 89.0 13,246,744 89.7 GROSS PROFIT 760,467 10.8 696,765 9.8 1,552,362 11.0 1,514,155 10.3 CARMAX AUTO FINANCE INCOME 115,580 1.6 134,987 1.9 262,550 1.9 272,345 1.8 Selling, general and administrative expenses 610,562 8.7 585,694 8.3 1,249,140 8.8 1,145,531 7.8 Depreciation and amortization 63,901 0.9 58,817 0.8 125,770 0.9 117,236 0.8 Interest expense 27,021 0.4 31,585 0.4 58,383 0.4 62,051 0.4 Other income ( 3,281 ) — ( 2,630 ) — ( 2,865 ) — ( 3,844 ) — Earnings before income taxes 177,844 2.5 158,286 2.2 384,484 2.7 465,526 3.2 Income tax provision 45,035 0.6 39,651 0.6 99,235 0.7 118,593 0.8 NET EARNINGS $ 132,809 1.9 $ 118,635 1.7 $ 285,249 2.0 $ 346,933 2.4 WEIGHTED AVERAGE COMMON SHARES: Basic 155,866 158,479 156,513 158,298 Diluted 156,526 159,238 157,116 158,900 NET EARNINGS PER SHARE: Basic $ 0.85 $ 0.75 $ 1.82 $ 2.19 Diluted $ 0.85 $ 0.75 $ 1.82 $ 2.18 (1) Percents are calculated as a percentage of net sales and operating revenues and may not total due to rounding. See accompanying notes to cons

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements ( Unaudited ) 1. Background Business. CarMax, Inc. ("we," "our," "us," "CarMax" and "the company"), including its wholly owned subsidiaries, is the nation's largest retailer of used vehicles. We operate in two reportable segments: CarMax Sales Operations and CarMax Auto Finance ("CAF"). Our CarMax Sales Operations segment consists of all aspects of our auto merchandising and service operations, excluding financing provided by CAF. Our CAF segment consists solely of our own finance operation that provides financing to customers buying retail vehicles from CarMax. On June 1, 2021, we completed the acquisition of Edmunds Holding Company ("Edmunds"). At that time, Edmunds was identified as a non-reportable operating segment and has been presented as "Other" in the Segment Information footnote in our prior period financial statements. Since the acquisition, Edmunds' business strategy has become increasingly integrated with that of CarMax Sales Operations. Beginning in the first quarter of fiscal 2025, the chief operating decision maker ("CODM") assessed the financial performance related to Edmunds' operations together with the rest of the CarMax Sales Operations segment. As a result, as of May 31, 2024, the company realigned its operating segments to be consistent with the manner in which the CODM assesses performance and makes resource allocations. The company now operates in two operating segments, CarMax Sales Operations and CAF, both of which continue to be reportable segments. The operating segment change did not impact the company's consolidated financial statements but did impact our previous segment footnote disclosure. The Segment Information footnote is no longer presented, as the previous disclosures were for the purpose of presenting the Edmunds operating segment separate from CarMax Sales Operations. The current and prior period required disclosures related to our reportable segments are included elsewhere wit

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