, a chain of used car dealers, upped its fourth-quarter sales and earnings guidance for the second time this month Tuesday, citing a dramatic increase in sales financed by its subprime lender, Drive.
The company said it now expects same-store sales, or sales at dealerships open at least a year, to rise 11% or 12%, up from its previous range of 7% to 9%. It also expects earnings of 26 to 27 cents a share, up from its previous guidance of 23 to 25 cents a share.
On Feb. 3, the company raised its same-store sales target from a range of 2% to 7%, and its earnings estimate from 19 to 23 cents a share.
The shares were recently trading up 31 cents, or 1%, to $31.21, after losing 2% during regular trading hours.
"At the end of January, we began to experience a dramatic increase in sales financed by our subprime lender Drive," the company said. "Based on industry patterns, we understand that subprime transactions can see a two- to threefold increase during tax refund season, and we have seen such an increase since the end of last month."
It now expects Drive-financed sales to contribute about 5 percentage points incrementally to its used-car division in fourth-quarter used-car comp sales. CarMax had not rolled out subprime lending to its full store base until August 2004, so it was reluctant to forecast such a large increase on the basis of the small number of stores testing the program in the fourth quarter of 2003.
Shares of CarMax have gained 63% since August, when
wrote that they looked like a bargain.
The company is expected to report its actual results in March.