CarMax profit plunge 20%; revenue misses estimate

Used vehicle specialty retailer CarMax (KMX) missed consensus estimates and reported modest sales growth for the fourth quarter of 2018 in light of lower store traffic along with flat conversions and a used unit comparable store decline of 8%. Net sales and operating revenues increased marginally by 0.8% to $4.08 billion. Profit for the quarter was impacted by the 2017 Tax Act, which dragged earnings by $32.7 million or $0.18 per share and a one-time discretionary bonus of $8 million. Net earnings plummeted 20% year-over-year to $122.1 million or $0.67 per share. In the pre-market trading session, CarMax stock sank 8% due to the weaker results.

Unit Sales

For the quarter, CarMax’s total used unit sales declined 3.1%, while it increased 7.5% for the fiscal year 2018. Total wholesale unit sales rose 8.9%, while used unit sales in comparable stores declined 8%.

Store Openings

CarMax opened four stores during the fourth quarter of 2018. The company entered into two new television markets, namely Myrtle Beach, South Carolina and Portland, Maine and added two stores in existing television markets (Boston, Massachusetts and Denver, Colorado).

Outlook

The Richmond, VA-based company said that during the next 12 months it plans to enter nine new television markets and will be expanding its presence in six existing television markets. Of the 15 stores CarMax  plans to open during the 12 months ending Feb. 28, 2019, 10 will be in Metropolitan Statistical Areas having populations of 600,000 or less (defined as small markets).