The Richmond, Va., used car seller made $54 million, or 50 cents a share, for the quarter ended Aug. 31. That's up from the year-ago $38 million, or 35 cents a share. The latest quarter included a benefit of 4 cents per share from favorable CarMax Auto Finance items.Sales rose 18% from a year ago to $1.93 billion.
Analysts surveyed by Thomson Financial were looking for a 41-cent profit on sales of $1.85 billion.
The company said it now expects to make $1.55 to $1.65 a share for the year ending next February on same-store sales growth of 6%-8%. CarMax had previously forecast a profit of $1.27 to $1.45 a share on comp growth of 2%-8%.
"We had another strong quarter, with solid contributions on many fronts," said CEO Tom Folliard. "Continued strong traffic and store execution were the primary drivers of our 7% used unit comps. We were particularly pleased with our robust sales performance given the difficult comparison with last year's second quarter when we reported 10% comps.
"Wholesale sales climbed reflecting increases in both retail sales and appraisal traffic," said Folliard. "New vehicle unit sales were down, reflecting a combination of weaker new car industry trends and our strategic decision to increase targeted gross margin dollars per unit on new vehicles. The increase in other sales and revenues reflected an increase in extended service plan sales in line with our used unit sales growth and an increase in third-party finance fees resulting from a decline in subprime-financed sales."
"Similar to the first quarter, our used vehicle gross profit per unit benefited from a steady, consistent sales performance," said Folliard. "CarMax is a volume-based business, and we systematically cut prices based on our proprietary pricing algorithms in order to appropriately balance inventory turns and margin achievement. When our sales pace is consistently strong, we take fewer pricing reductions, which in turn maximizes gross profit dollars.
"As anticipated, our wholesale vehicle gross profit increased to nearly $700 per unit, reflecting the combined benefits of refinements in our car buying process and increased efficiencies in our in-store auctions over the past couple of years," said Folliard.