CarMax reported earnings per share of $1.31, exceeding the expected 95 cents, and revenue of $8.01 billion, surpassing the $7.42 billion forecast. However, the company is grappling with margin pressures, as total gross profit fell 4.4% year-over-year to $854.4 million, with retail used vehicle gross profit down 9.5%.
The decline in retail gross profit per used unit to $2,177, down $230 from last year's record, raises concerns about the company's ability to sustain growth amid challenging market conditions. New CEO Keith Barr, who took over in March, is optimistic about a multi-year turnaround strategy focused on enhancing customer experience and operational efficiency.
He plans to unveil more details in the fall, having already initiated changes like improving the website and introducing AI for customer service. Despite the recent share decline, CarMax's stock is still up approximately 25% year-to-date, reflecting some investor confidence in Barr's leadership.
Meanwhile, competitor Carvana's shares also fell over 7% as it announced plans for new franchised stores, although it will continue to sell vehicles exclusively online. Barr noted that most CarMax customers prefer visiting physical stores to inspect vehicles before purchasing