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CarMax Inc - Stock Quote KMX

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Morningstar's CarMax Inc Stock Analysis

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CarMax Struggles to End Fiscal 2022, but We Are Optimistic About Its Future

Analyst Note

| David Whiston, CFA, CPA, CFE |

CarMax ended fiscal 2022 with a quarter bombarded with macroeconomic headwinds and the impact of the chip shortage. Management, continuing to focus on maintaining gross profit per retail unit in the low $2,000 range, squeezed retail gross margin per unit by 250 basis points year over year to 7.4%, while diluted EPS of $0.98 missed the Refinitiv consensus of $1.25. One reason the stock fell over 7% on April 12 is likely the poor comparable store unit sales decline of 6.5%, which was the worst level for this metric, other than at the start of the pandemic, since an 8% fall in fourth-quarter fiscal 2018. Management called out headwinds around poor consumer confidence, expensive vehicles (transaction prices increased 39.7% to $29,312), the omicron COVID-19 variant, and the absence of government stimulus that occurred in the prior year’s quarter. Management also updated its May 2021 long-term targets, which needed updating because full-year fiscal 2022 revenue of $31.9 billion (up 68% from fiscal 2021) is almost at the fiscal 2026 target of $33 billion. The new targets are $33 billion to $45 billion of revenue by fiscal 2026 (we currently model $35.6 billion) and selling between 2 million and 2.4 million combined retail and wholesale units by then, up from a prior target of 2 million.

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CarMax Inc's Company Profile

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
Sector Consumer Cyclical
Industry Auto & Truck Dealerships
Most Recent Earnings Feb 28, 2022
Fiscal Year End Feb 28, 2023
Stock Type Cyclical
Employees 32,647

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