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CarMax Hits the Skids

Shares tumble after the used-car seller cuts guidance.
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slid 12% Wednesday after the used-car seller slashed its fiscal-year outlook, citing a sales slowdown and macroeconomic concerns.

The Richmond, Va.-based company now sees earnings of 92 cents to 98 cents a share for fiscal 2008, down from its prior guidance of $1.03 to $1.14. Analysts projected earnings of $1.06 a share for the year ending February, according to Thomson Financial.

CarMax said the new outlook reflect a slower-than-anticipated pace of same-store sales growth and the recent credit market turmoil, which drove up its funding costs in the asset-backed market. In addition, the company pointed to missed sales and earnings targets for the first half of the fiscal year.

For the second quarter, CarMax reported a profit of $65 million, or 29 cents a share, up from $54.3 million, or 25 cents a share, a year earlier. The results matched analysts' average forecast.

Revenue rose to $2.12 billion from $1.93 billion, slightly shy of Wall Street's $2.2 billion target. Same-store sales, or sales at stores open at least one year, rose 3%.

"Our sales and profits for the first half of the fiscal year fell short of our original expectations," said Tom Folliard, president and chief executive. "We believe this is largely the result of the current market environment and the industry-wide slowdown in auto sales."

Shares of CarMax recently were down $3.07 to $21.99.