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CarMax Inc KMX Stock Quote

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Morningstar‘s Stock Analysis KMX

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Economic Moat

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Capital Allocation

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We Believe CarMax's Free Cash Flow Will Improve When Inventory Becomes Cheaper

Business Strategy and Outlook

| David Whiston, CFA, CPA, CFE |

CarMax's revenue has increased at a compound annual rate of about 13% since fiscal 2000 because of the success of customer-friendly sales practices and use of information technology. The firm targets between a 12%-19% annual growth rate for fiscal 2021 to fiscal 2026. Competing dealerships have tried no-haggle pricing and failed because their salesforces are trained to focus on selling vehicles that earn the highest possible gross profit rather than vehicles that customers actually want or need. A traditional dealership relies on profits from service to offset the typically lower margins it gets on new-vehicle sales. CarMax does not hire salespeople from the auto industry, and salespeople receive the same commission regardless of the vehicle sold. They do not even know the profit on the vehicle sold. The CarMax customer stays with the same salesperson throughout the transaction rather than being passed off to a finance department, receiving a buying experience that is hard to match at a dealership. This focus on customer satisfaction, combined with scale advantages that allow for a wide inventory selection and extensive pricing data, create a narrow economic moat.

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Key Statistics KMX

Company Profile KMX

Business Description

CarMax sells, finances, and services used and new cars through a chain of over 230 used retail stores. It was formed in 1993 as a unit of Circuit City and spun off into an independent company in late 2002. Used-vehicle sales typically account for about 83% of revenue and wholesale about 13%, with the remaining portion composed of extended service plans and repair. In fiscal 2022, the company retailed and wholesaled 924,338 and 706,212 used vehicles, respectively. CarMax is the largest used-vehicle retailer in the U.S. but still estimates that it has only about 4% U.S. market share of vehicles 0-10 years old in 2021. It seeks over 5% share by the end of calendar 2025 and revenue between $33 billion to $45 billion by fiscal 2026. CarMax is based in Richmond, Virginia.

Contact
12800 Tuckahoe Creek Parkway
Richmond, VA, 23238
T +1 804 747-0422
Industry Auto & Truck Dealerships
Most Recent Earnings May 31, 2022
Fiscal Year End Feb 28, 2023
Employees 32,647

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