(Updated for stock movements and additional information about related companies.)RICHMOND, Va. (TheStreet) -- CarMax (KMX) - Get Report, the big used-car retailer, posted strong second-quarter growth compared with a year ago, mostly because business in 2008 was exceptionally lousy.
Still, when Americans are buying automobiles at all, they appear to be buying the used kind. Some 97% of CarMax's business is in "pre-owned" vehicles, and the company posted an 8% increase in used-car unit sales from the year-ago quarter, on a comparable stores basis.
That was apparently enough to drive top-line growth of 13% in the just-ended period, to $2.08 billion from $1.84 billion a year ago.
Earnings easily bested Wall Street expectations. Excluding a gain of 10 cents a share from writing up the value subordinated bonds in its CarMax Auto Finance unit, the company posted a profit of 36 cents a share. Analysts had been looking for just 18 cents. Including the item, CarMax earned $103 million, or 46 cents a share.
A year earlier, CarMax registered a per-share profit of 14 cents a share, which excludes charges of 8 cents.
Investors cheered the report. Late in Tuesday's regular session, CarMax shares surged nearly 11%, or $2.08, to $21.41, in frantic trading. Volume reached 11.8 million shares, dwarfing the average daily turnover of 2.9 million.
In the accompanying statement, CarMax boss Tom Folliard said, "In part, the sales growth was the result of easier year-over-year comparisons; however, it also reflected improving customer traffic trends and an improvement in sales execution."
But customer traffic, he went on to note, actually
compared with a year ago, even though traffic has strengthened from the absolute pits of early 2009, on the back, it said, of the cash-for-clunkers program.
What CarMax did well, therefore, was sell. It converted a larger percentage of the people kicking tires on its lots into actual buyers. Though the company made no mention of the "ABCs" in its earnings statement, it partly attributed its better "sales conversion rate" to "the effects of our new sales training initiatives."
CarMax also cited increased inventories of cars on its lots, "a larger percentage of motivated buyers," and an increase in the average selling price of its vehicles to $17,185 per vehicle from $16,278 a year earlier.
CarMax's much smaller competitor,
, also surprised Wall Street with
when it reported its second quarter earlier in the month.
Elsewhere in the auto universe, car-parts retalier and repair chain
is slated to release results Wednesday before the opening bell.
-- Written by Scott Eden in New York
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Scott Eden has covered business -- both large and small -- for more than a decade. Prior to joining TheStreet.com, he worked as a features reporter for Dealmaker and Trader Monthly magazines. Before that, he wrote for the Chicago Reader, that city's weekly paper. Early in his career, he was a staff reporter at the Dow Jones News Service. His reporting has appeared in The Wall Street Journal, Men's Journal, the St. Petersburg (Fla.) Times, and the Believer magazine, among other publications. He's also the author of Touchdown Jesus (Simon & Schuster, 2005), a nonfiction book about Notre Dame football fans and the business and politics of big-time college sports. He has degrees from Notre Dame and Washington University in St. Louis.