CarMax Slammed by Consumer Activists but Investors Could Care Less

NEW YORK (TheStreet) -- Consumer activists in California are slamming CarMax (KMX), the nation's No. 1 retailer of used cars, for what they claim are sales of "unrepaired, defective" vehicles subject to manufacturers' recalls. They want the state's attorney general to go after the company.

CarMax responded with a statement explaining that information about recalls pertaining to vehicles its sells are provided and that every buyer signs a form acknowledging that the information was received. The company noted that only authorized dealers are authorized to perform recall-related repairs. 

What do investors think about the activists' call for California's attorney general to crack down? Not much. CarMax shares closed Friday up by a fraction to $72.86 but the stock is up 12.5% for the year to date compared with the S&P 500, up 3.4% year to date. Over the past five years, CarMax is up 253%, compared with 87% for the S&P. 

As a longer-term investment in U.S. automotive retailing, CarMax not only outpaced the market but also the largest retailer of new and used vehicles, AutoNation  (AN). Over the past five years, AutoNation shares have gained 198%. Shares of two other large publicly held retail chains, Penske Automotive  (PAG) and Group 1 Automotive  (GPI) tracked those of CarMax. 

While new car sales came in at about 16.5 million last year in the U.S., the number of used cars sold by retailers and individuals was more than double that. For CarMax, the gross profit amounts to between $2,100 and $2,200 per unit sold. 

If you liked this article you might like

It's Decision Time for the Fed in the Week Ahead

Fight Off Complacency: Cramer's 'Mad Money' Recap (Fri 9/15/17)

Shrug Off The Apple-FANG Bite: Cramer's 'Mad Money' Recap (Thur 9/14/17)

CarMax, Avis Still Assessing Hurricane Harvey's Catastrophe