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CarMax Reports Record Third Quarter Results

CarMax, Inc. (NYSE:KMX) today reported record results for the third quarter ended November 30, 2013.

  • Net sales and operating revenues increased 13% to $2.94 billion.
  • Used unit sales in comparable stores increased 10%.
  • Total used unit sales rose 15%.
  • Total wholesale unit sales increased 4%.
  • CarMax Auto Finance (CAF) income increased 16% to $83.9 million.
  • Net earnings grew 12% to $106.5 million. Net earnings per diluted share rose 15% to $0.47.

“We are pleased with our continued growth in sales and earnings,” said Tom Folliard, president and chief executive officer. “The earnings growth was driven by double digit increases in total used units and CAF income.”

Third Quarter Business Performance Review

Sales . Total used vehicle unit sales grew 15% and comparable store used units grew 10% versus the prior year’s third quarter. Comparable store used unit sales benefited from improved execution in our stores and an attractive consumer credit environment, as well as a modest increase in store traffic. Wholesale vehicle unit sales grew 4% compared with last year’s quarter, reflecting the growth in our store base.

Other sales and revenues declined 5% year-over-year. Extended service plan (ESP) revenues were similar to the prior year, as the increase driven by the growth in our retail vehicle sales was offset by an increase in our allowance for ESP returns of $0.02 per diluted share. The rise in the allowance reflected increases in ESP cancellations prior to the end of their contract term. Net third-party finance fees declined by $4.6 million as the third-party subprime providers (those who purchase financings at a discount) originated 18% of used vehicle unit sales in the current quarter versus 15% in the prior year’s third quarter. Over the last two years, the volume of this financing has increased, as our third-party subprime providers have been making more attractive offers. Late in the quarter, however, we began to see tightening of the credit terms offered by our subprime providers.

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