CarMax to report Q2 earnings on Sept 26. Here’s what to expect

CarMax, Inc. (NYSE: KMX) had a modest start to fiscal 2025 as it reported lower sales and earnings for the first quarter, extending the downtrend seen in the trailing quarters. Meanwhile, the used car retailer looks to expand its market share, banking on improvements in used-vehicle affordability and stabilization of vehicle value.

The stock experienced high fluctuation in the past 12 months and the price declined about 5% during that period. In recent weeks, the shares regained some momentum and traded above their long-term average. Despite the recovery, the valuation remains attractive from an investment perspective.

CarMax’s second-quarter report is expected to be released on Thursday, September 26, at 6:50 am ET. In the trailing two quarters, the company delivered weaker-than-expected revenue and earnings. For Q2, market watchers project revenues of $6.77 billion, which represents a 5% decrease from the same period of fiscal 2024. Net income is seen increasing to $0.83 per share in the August quarter from $0.75 per share a year earlier.

Slowdown

The company’s margins have come under pressure from lower used vehicle prices, with customers’ shift to brand-new vehicles adding to the strain on sales. In contrast to the pandemic-era boom when used vehicle dealers enjoyed significant pricing power due to the limited availability of new units, now they are forced to sell at discounted prices. The other headwinds include high interest rates and elevated inflation.

Meanwhile, the management has implemented several measures to strengthen the bottom line, including a reduction in capex and marketing expenditures. Indicating those efforts have started bearing fruit, there has been an improvement in gross margin performance lately. While competition is increasing in the second-hand vehicle market, CarMax’s scale should enable it to stay ahead of rivals.

From CarMax’s Q1 2025 earnings call:

“On the market share, look there’s a lot of volatility there on short periods, barring any other big price correction, my plan is not necessarily talk about the market share gain until the end of the year because already we’re seeing — we had some markets that are up, some markets that are down. I think looking over the longer period of time is the way to really look at it. So again, I’ll update this again at the end of the year unless we see some big macro factor that’s having an outsized impact on it, but we feel good about the trend.”

Weak Outcome

In the first three months of FY25, revenues decreased 7.5% year-over-year to $7.1 billion, continuing the recent trend. That translated into a 33% fall in Q1 net profit to $152.4 million or $0.97 per share. Combined retail and wholesale used vehicle unit sales were 358,817 in the May quarter, a decline of 5.3% from the year-ago period. For the Used Vehicles and Wholesale Vehicles segments, average selling price declined by 3% and 10% respectively, year-over-year. Meanwhile, there was continued strong income growth in CarMax Auto Finance.

CMX traded mostly sideways so far this week. In a sign it is gaining momentum ahead of the earnings, the stock made modest gains in the early hours of Thursday.