CarMax Inc. (NYSE:KMX) delivered first-quarter results ahead of market forecasts, with both earnings and revenue surpassing analyst expectations as the company’s recently introduced four-pillar strategy began to show encouraging signs of progress.
Adjusted earnings per share came in at $1.31, exceeding the consensus estimate of $0.96 by $0.35. Revenue increased 6.2% year over year to $8.0 billion, comfortably above analyst expectations of $7.39 billion and up from $7.5 billion in the same period last year.
Shares of the used-vehicle retailer rose 3.6% following the earnings announcement.
Sales Volumes Improve Across Retail and Wholesale Operations
Combined retail and wholesale vehicle sales climbed 3.3% to 392,357 units during the quarter.
Retail used-vehicle sales edged higher to 230,293 units, although comparable-store used-unit sales slipped 0.8% from a year earlier. Gross profit per retail used vehicle declined by $230 to $2,177, easing from last year’s record level as the company adjusted pricing to support stronger sales activity.
The wholesale business also posted solid growth, with unit sales rising 8.4% to 162,064 vehicles. Gross profit per wholesale unit remained stable at $1,046, broadly unchanged from the prior year.
Management Highlights Early Success of Strategic Initiatives
“We are entering this fiscal year with a clear strategy that is driving early results,” said Keith Barr, President and Chief Executive Officer. “We have identified four strategic pillars that will meaningfully improve how we operate at scale and support strong performance.”
CarMax’s strategy centers on competitive pricing, improving the customer journey, maximizing value across transactions and lowering operating costs.
Management indicated that these initiatives are beginning to contribute to improved operational performance and stronger execution across the business.
Cost Reduction Efforts Continue to Deliver Results
The company reported further progress on its efficiency programme during the quarter.
Selling, general and administrative expenses declined 3.7% to $635.2 million, while SG&A expense per total unit improved by $118 to $1,619, representing a 6.8% year-over-year improvement.
CarMax reiterated that it remains on track to achieve its target of $200 million in annualized SG&A savings by the end of fiscal 2027.
Financing Business Expands Market Penetration
CarMax Auto Finance continued to gain traction, with penetration increasing 150 basis points from a year ago to 43.3%.
The company said the improvement reflects successful execution of its full-spectrum financing strategy.
Income from CarMax Auto Finance totaled $140.2 million, down 1.0% year over year. The decline was largely attributable to lower auto loan balances following a $900 million non-prime securitization completed during the third quarter.
Vehicle Purchasing Activity Moderates
During the quarter, CarMax acquired approximately 322,000 vehicles from consumers and dealers, representing a 4.4% decline compared with the same period last year.
Despite the lower purchasing volume, management maintained its focus on inventory management and profitability across its retail and wholesale channels.
Analysts See Positive Signs Under New Leadership
Following the results, analysts at Vital Knowledge described the quarter as “a strong showing for KMX’s new CEO,” adding that there is evidence the company’s “turnaround initiatives are bearing fruit.”
The report reinforces growing optimism that CarMax’s operational improvements and strategic initiatives may support stronger performance in the quarters ahead.