CarMax (NYSE:) reported a decline in fourth-quarter earnings and revenue, which fell short of Wall Street expectations, and the company's stock fell 7.6% premarket. The auto retailer's adjusted earnings per share (EPS) came in at $0.32, below the analyst consensus of $0.46. Sales were also lower than expected at $5.6 billion, compared to the forecast of $5.79 billion.
Compared to the same period last year, net revenue decreased by 1.7%. The company's retail used vehicle sales increased slightly by 1.3%, and same-store used vehicle sales increased by 0.1%. However, wholesale units decreased by 4.0%. CarMax cited increasing vehicle affordability challenges due to inflationary pressures, rising interest rates and declining consumer confidence as factors impacting sales performance.
Gross profit per used retail unit was $2,251 and gross profit per wholesale unit was $1,120, both slightly down from the strong fourth quarter of last year. The company purchased 234,000 vehicles from consumers and dealers, a decrease of 10.8% from the same period last year. Despite these challenges, CarMax Auto Finance's (CAF) revenue increased 18.9% due to lower loan loss provisions and higher average managed receivables.
President and CEO Bill Nash said of the results, “We are encouraged by our business performance in the fourth quarter. We reported an increase in total used unit sales and comps, and an increase in retail and wholesale unit sales. We delivered strong gross margins, continued to actively manage SG&A, and significantly increased CAF revenue year-over-year.”
Nash said the company's focus on enhancing its omnichannel experience and leveraging data science, automation and AI has strengthened its operational foundation. Despite the reported revenue and revenue shortfalls, CarMax is optimistic about positioning the company for future growth.
Investors reacted negatively to the earnings release, with the stock price reflecting concerns about the company's ability to meet market expectations. The post-earnings stock price decline suggests that the market is more focused on short-term issues than the company's strategic initiatives.
