CarMax Guides Up

CarMax (KMX Quote) guided up for the fourth quarter, saying its wholesale business did better than expected.

The Richmond, Va., used-car lot said it expects to make 37 cents to 39 cents a share for the fourth quarter. That's up from 28 cents a year ago and the 28-cent estimate of analysts surveyed by Thomson Financial.

The company said comparable store used unit sales declined 3%, which is near the low end of the company's original range of expectations. On Dec. 21, CarMax said it expected to make 25 cents to 31 cents a share on a same-store sales change ranging from minus 4% to plus 2%.

"Our fourth quarter earnings will be stronger than expected, primarily as a result of continued strong increases in wholesale sales and profits," said CEO Austin Ligon. "Our new expectations also include approximately 2 cents per share from favorable adjustments at CarMax Auto Finance.

"We had a particularly challenging comparison to last year's 12% used unit comps, which included 5 percentage points attributable to rolling out a new subprime finance provider," said Ligon. "This year, subprime-financed sales represented only approximately 2% of our fourth quarter unit sales, as a result of program changes implemented by the provider. Absent this decline, we would have been slightly above the mid-point of our original comp expectation range."

Late Friday, CarMax shares surged $1.38 to $32.50.