CarMax Q3 Earnings Halve Amid Sluggish Sales, Shares Repurchased

Ticker: KMX · Form: 10-Q · Filed: 2025-12-23T00:00:00.000Z

Sentiment: bearish

Topics: Used Car Market, Retail Sales, Earnings Decline, Share Repurchases, Auto Finance, Consumer Spending, Economic Slowdown

Related Tickers: KMX, CVNA, AN

TL;DR

**KMX's earnings got absolutely crushed, signaling a tough road ahead for used car sales despite aggressive buybacks.**

AI Summary

CarMax Inc. (KMX) reported a significant decline in net earnings for the three and nine months ended November 30, 2025, primarily driven by reduced sales and operating revenues. For the three-month period, net earnings fell by 50.4% to $62.2 million from $125.4 million in the prior year, with diluted EPS dropping from $0.81 to $0.43. Net sales and operating revenues decreased by 6.9% to $5.79 billion from $6.22 billion, largely due to a 7.0% decline in used vehicle sales to $4.55 billion and a 6.3% drop in wholesale vehicle sales to $1.10 billion. Gross profit also decreased by 12.9% to $590.0 million. For the nine-month period, net earnings decreased by 10.4% to $368.0 million from $410.7 million, and diluted EPS declined from $2.62 to $2.46. Total net sales and operating revenues for the nine months decreased by 2.0% to $19.94 billion from $20.35 billion. Despite the revenue decline, CarMax Auto Finance income saw a 9.3% increase to $174.7 million for the three-month period, indicating strength in its financing segment. The company also significantly increased its share repurchases, spending $588.4 million in the nine months ended November 30, 2025, compared to $329.6 million in the same period last year, which reduced outstanding common shares from 153.3 million to 143.1 million.

Why It Matters

This filing reveals CarMax is struggling with declining sales in a competitive used car market, impacting investor confidence and potentially signaling broader economic headwinds for discretionary consumer spending. The substantial drop in net earnings and revenue, despite increased CarMax Auto Finance income, suggests core vehicle sales are under pressure. For employees, this could mean tighter operational controls or slower growth. Customers might see more aggressive pricing or promotions as CarMax tries to stimulate demand. Competitors like Carvana or traditional dealerships could capitalize on CarMax's challenges, intensifying the fight for market share.

Risk Assessment

Risk Level: medium — The 50.4% decline in net earnings for the three months ended November 30, 2025, to $62.2 million, coupled with a 6.9% decrease in net sales and operating revenues to $5.79 billion, indicates significant operational challenges. While the company is actively repurchasing shares ($588.4 million in nine months), the core business performance is deteriorating, presenting a medium risk for investors.

Analyst Insight

Investors should exercise caution and consider a 'hold' or 'reduce' position on KMX. While share buybacks are supportive, the core business decline in sales and earnings is a red flag. Monitor upcoming economic data for consumer spending trends and CarMax's next earnings call for signs of stabilization in vehicle sales.

Financial Highlights

revenue
$5.79 billion
net Income
$62.2 million
eps
$0.43
gross Margin
10.2%
cash Position
$204.9 million
revenue Growth
-6.9%

Revenue Breakdown

SegmentRevenueGrowth
Used vehicle sales$4,548,197,000-7.0%
Wholesale vehicle sales$1,095,119,000-6.3%
Other sales and revenues$150,630,000-9.2%
CarMax Auto Finance Income$174,738,000+9.3%

Key Numbers

Key Players & Entities

FAQ

What were CarMax's net earnings for the quarter ended November 30, 2025?

CarMax's net earnings for the three months ended November 30, 2025, were $62.2 million, a significant decrease from $125.4 million reported in the same period last year.

How did CarMax's total sales and operating revenues perform in the recent quarter?

Total net sales and operating revenues for CarMax decreased by 6.9% to $5.79 billion for the three months ended November 30, 2025, down from $6.22 billion in the prior year.

What was the change in CarMax's used vehicle sales for the quarter?

Used vehicle sales for CarMax declined by 7.0% to $4.55 billion for the three months ended November 30, 2025, compared to $4.89 billion in the same period of 2024.

Did CarMax Auto Finance (CAF) contribute positively to earnings?

Yes, CarMax Auto Finance income increased by 9.3% to $174.7 million for the three months ended November 30, 2025, up from $159.9 million in the prior year, despite overall revenue declines.

What is CarMax's strategy regarding share repurchases?

CarMax has been actively repurchasing shares, spending $588.4 million on repurchase and retirement of common stock for the nine months ended November 30, 2025, a substantial increase from $329.6 million in the same period last year.

What are the key risks CarMax is facing according to the filing?

The filing implicitly highlights risks related to declining sales volumes in both used and wholesale vehicles, which directly impacts gross profit. The 12.9% decrease in gross profit for the three months ended November 30, 2025, to $590.0 million, indicates pricing pressures or higher cost of sales.

How has CarMax's inventory changed over the past nine months?

CarMax's inventory decreased significantly, from $3.93 billion as of February 28, 2025, to $3.13 billion as of November 30, 2025, reflecting an $806.7 million decrease in inventory during the nine-month period.

What is the current outstanding share count for CarMax?

As of December 19, 2025, CarMax had 141,796,641 shares of common stock outstanding. This is down from 153,319,678 shares issued and outstanding as of February 28, 2025.

What is the outlook for CarMax based on these results?

The results suggest a challenging market environment for CarMax, with declining sales and earnings. While CAF income is a bright spot, the core vehicle sales performance indicates potential headwinds for future growth unless market conditions improve or strategic changes are implemented.

What is CarMax's primary business model?

CarMax operates as the nation's largest retailer of used vehicles, offering an omni-channel experience for buying and selling vehicles. It also provides related services like financing through CarMax Auto Finance, extended protection plans, and vehicle repair services.

Risk Factors

Industry Context

The used vehicle retail industry is highly competitive and sensitive to economic conditions. CarMax operates as the largest retailer of used vehicles in the U.S., leveraging an omni-channel strategy. Key trends include increasing online sales, evolving consumer preferences for flexible purchasing options, and the impact of macroeconomic factors like interest rates and inflation on demand and affordability.

Regulatory Implications

CarMax faces regulatory scrutiny common to automotive retailers and finance companies. This includes compliance with consumer protection laws, advertising standards, and financing regulations. Changes in these regulations, or increased enforcement, could lead to higher compliance costs or operational adjustments.

What Investors Should Do

  1. [object Object]
  2. [object Object]
  3. [object Object]
  4. [object Object]

Glossary

CarMax Auto Finance (CAF)
CarMax's wholly owned subsidiary that provides financing to customers purchasing vehicles from CarMax. (CAF income is a significant contributor to CarMax's overall profitability, and its performance is closely watched by investors, especially in relation to interest rate environments.)
Extended Protection Plan (EPP)
An optional service contract offered to customers that covers certain repairs or services beyond the manufacturer's warranty. (EPP sales are a component of 'Other sales and revenues' and contribute to gross profit. A decline in these sales can impact overall revenue and profitability.)
Guaranteed Asset Protection (GAP)
An add-on product that covers the difference between what a customer owes on a loan and the actual cash value of the vehicle in case of a total loss. (GAP is typically sold in conjunction with financing and is part of 'Other sales and revenues', contributing to the company's ancillary income streams.)
Omni-channel experience
A customer experience strategy that integrates online and physical store channels to provide a seamless shopping journey. (CarMax emphasizes its omni-channel capabilities as a key differentiator in the competitive auto market, aiming to provide flexibility for customers.)
No-haggle prices
A pricing strategy where the listed price of a vehicle is the final price, without negotiation. (This is a core element of CarMax's customer-friendly sales process, aiming to simplify the car buying experience and attract customers who prefer transparency.)
Securitization
The process of pooling various types of contractual debt, such as mortgages, auto loans, or credit card debt, and selling their related cash flows to third-party investors as securities. (CarMax Auto Finance utilizes securitization to fund its loan portfolio, making market conditions for securitization important for its operations.)

Year-Over-Year Comparison

Compared to the prior year's comparable periods, CarMax Inc. (KMX) experienced a significant downturn in financial performance. Net sales and operating revenues for the three months ended November 30, 2025, fell by 6.9% to $5.79 billion, with used vehicle sales down 7.0% and wholesale vehicle sales down 6.3%. This revenue decline contributed to a substantial 50.4% drop in net earnings to $62.2 million and a decrease in diluted EPS from $0.81 to $0.43. Gross profit also saw a notable decrease of 12.9%. While the financing segment, CarMax Auto Finance, showed resilience with a 9.3% income increase, the overall trend indicates a challenging operating environment.

Filing Stats: 4,630 words · 19 min read · ~15 pages · Grade level 11.2 · Accepted 2025-12-23 10:02:45

Key Financial Figures

Filing Documents

FINANCIAL INFORMATION

PART I. FINANCIAL INFORMATION

Financial Statements

Item 1. Financial Statements: Consolidated Statements of Earnings (Unaudited) – Three and Nine Months Ended November 30, 2025 and 2024 3 Consolidated Statements of Comprehensive Income (Unaudited) – Three and Nine Months Ended November 30, 2025 and 2024 4 Consolidated Balance Sheets (Unaudited) – November 30, 2025 and February 28, 2025 5 Consolidated Statements of Cash Flows (Unaudited) – Nine Months Ended November 30, 2025 and 2024 6 Consolidated Statements of Shareholders' Equity (Unaudited) – Three and Nine Months Ended November 30, 2025 and 2024 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 28

Quantitative and Qualitative Disclosures About Market Risk 43

Item 3. Quantitative and Qualitative Disclosures About Market Risk 43

Controls and Procedures 44

Item 4. Controls and Procedures 44

OTHER INFORMATION

PART II. OTHER INFORMATION

Legal Proceedings 45

Item 1. Legal Proceedings 45

Risk Factors 45

Item 1A. Risk Factors 45

Unregistered Sales of Equity Securities and Use of Proceeds 45

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 45

Exhibits 46

Item 6. Exhibits 46 SIGNATURES 47 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 November 30 Nine Months Ended November 30 (In thousands except per share data) 2025 % (1) 2024 % (1) 2025 % (1) 2024 % (1) SALES AND OPERATING REVENUES: Used vehicle sales $ 4,548,197 78.5 $ 4,888,858 78.6 $ 15,922,349 79.9 $ 16,243,415 79.8 Wholesale vehicle sales 1,095,119 18.9 1,168,639 18.8 3,497,425 17.5 3,579,543 17.6 Other sales and revenues 150,630 2.6 165,874 2.7 515,397 2.6 527,339 2.6 NET SALES AND OPERATING REVENUES 5,793,946 100.0 6,223,371 100.0 19,935,171 100.0 20,350,297 100.0 COST OF SALES: Used vehicle cost of sales 4,169,250 72.0 4,464,016 71.7 14,546,602 73.0 14,844,310 72.9 Wholesale vehicle cost of sales 980,366 16.9 1,030,564 16.6 3,088,781 15.5 3,146,465 15.5 Other cost of sales 54,282 0.9 51,145 0.8 98,451 0.5 129,514 0.6 TOTAL COST OF SALES 5,203,898 89.8 5,545,725 89.1 17,733,834 89.0 18,120,289 89.0 GROSS PROFIT 590,048 10.2 677,646 10.9 2,201,337 11.0 2,230,008 11.0 CARMAX AUTO FINANCE INCOME 174,738 3.0 159,885 2.6 419,026 2.1 422,435 2.1 Selling, general and administrative expenses 581,368 10.0 575,764 9.3 1,842,104 9.2 1,824,904 9.0 Depreciation and amortization 68,943 1.2 64,507 1.0 201,967 1.0 190,277 0.9 Interest expense 26,120 0.5 25,418 0.4 81,643 0.4 83,801 0.4 Other expense 4,468 0.1 5,370 0.1 535 — 2,505 — Earnings before income taxes 83,887 1.4 166,472 2.7 494,114 2.5 550,956 2.7 Income tax provision 21,672 0.4 41,031 0.7 126,140 0.6 140,266 0.7 NET EARNINGS $ 62,215 1.1 $ 125,441 2.0 $ 367,974 1.8 $ 410,690 2.0 WEIGHTED AVERAGE COMMON SHARES: Basic 145,548 154,582 149,004 155,874 Diluted 145,864 155,265 149,382 156,504 NET EARNINGS PER SHARE: Basic $ 0.43 $ 0.81 $ 2.47 $ 2.63 Diluted $ 0.43 $ 0.81 $ 2.46 $ 2.62 (1) Percents are calculated as a percentage of net sales and operating revenues and may not total due to rounding. See accompanying notes to consolidated

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. The company operates in two operating segments, CarMax Sales Operations and CAF, both of which are reportable segments. The chief executive officer, who serves as the company's chief operating decision maker ("CODM"), reviews the performance of our CarMax Sales Operations segment at the gross profit level, the components of which are presented within the consolidated statements of earnings. The CODM uses gross profit to assess financial performance, monitor forecasted versus actual results and adjust pricing strategy. The required segment information related to our CAF segment is presented in Note 3. Additionally, asset information by segment is not utilized for purposes of assessing performance or allocating resources and, as a result, such information has not been presented. We deliver an unrivaled customer experience by offering a broad selection of quality used vehicles and related products and services at competitive, no-haggle prices using a customer-friendly sales process. Our omni-channel experience provides a common platform across all of CarMax that leverages our scale, nationwide footprint and infrastructure and empowers our customers to buy a vehicle on their terms, whether online, in-store or through a seamless combination of both. Our associates, stores, technology and digital capabilities seamlessly tied together enable us to provide the most c

View on Read The Filing