CarMax Q1 profit rises 12%, beats estimates

CarMax Inc. (NYSE: KMX) reported a 12% jump in earnings for the first quarter of 2020 driven by strong conversion, solid growth in web traffic, and growth in store base. The results exceeded analysts’ expectations. Following this, the stock rose over 3% in the premarket session.

Net income advanced 12% to $266.7 million and earnings grew 20% to $1.59 per share. Net sales and operating revenues increased by 12% to $5.37 billion.

Used unit sales in comparable stores increased 9.5% and total used unit sales grew 13%. The comparable store sales performance primarily reflected strong conversion and solid growth in web traffic. Total wholesale unit sales rose by 6.6%, largely driven by an increase in appraisal buy rate and the growth in its store base.

The company believes several factors contributed to its comparable store sales growth, including solid execution supported by the effect of initiatives to enhance the customer experience; a robust lending environment, including increased conversion by Tier 2 and Tier 3 third-party finance providers; and a shift in the timing of some customer tax refunds into the first quarter.

Extended protection plan (EPP) net revenues grew by 11.2%, reflecting the combined effects of our strong used unit growth, increased product penetration rates, and provider cost decreases. Net third-party finance fees declined by $1 million, reflecting shifts in its sales mix by finance channel.

CarMax Auto Finance income moved up 0.3% on a 7.9% increase in average managed receivables, largely offset by the effects of a higher loan loss provision. The growth in average managed receivables and an increase in the provision as a percentage of managed receivables drove provision for loan losses higher.

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During the first quarter of fiscal 2020, CarMax opened three stores, two in new markets at Waco, Texas and McAllen, Texas and one in an existing market at Memphis, Tennessee. The company plans to open 10 stores in the balance of fiscal 2020 and 13 stores in fiscal 2021 with four store opening happening in Q1 2021.

Shares of CarMax ended Thursday’s regular session down 0.63% at $83 on the NYSE. The stock has risen over 14% in the past year and over 36% in the past three months.

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