CarMax used car sales plummet due to declining consumer confidence

CarMax Inc. said it sold fewer used vehicles in its fourth fiscal quarter due to declining consumer confidence and affordability concerns, although revenue from those sales rose nearly 33% due to a spike in average retail prices.

The company said net income for the quarter that ended Feb. 28 fell 24% to $159.8 million. Revenue in the quarter jumped 49% to $7.7 billion.

The number of used vehicles sold by CarMax fell 5.2% to 194,318 in the fourth fiscal quarter. Same-store used vehicle unit sales also fell 6.5% from the prior year period.

CarMax shares fell as results missed analysts’ estimates. At 1:11 p.m. EDT, CarMax shares slid 6.9% at $96.03.

Sustained high vehicle prices and economic uncertainty have scared off some customers. In fact, the average price of a used car rose nearly 40% — or $8,300 — to about $29,312 during the quarter, the Richmond, Va.-based company said.

“Right after seeing the [omicron] The COVID outbreak, we started to see a lack of consumer confidence,” CarMax CEO Bill Nash said during a Tuesday quarterly earnings conference call with analysts and investors. war… there’s just a lot of weight on the consumer right now.”

However, CarMax’s combined retail and wholesale vehicle sales reached 343,413, up 11.3% from the prior year period. The company fared better on the wholesale side: it saw 149,095 wholesale vehicle sales in the quarter, up 44%.

The consumer price index tracking used vehicles fell 3.8% in March from February, according to the Bureau of Labor Statistics. This is the second consecutive monthly decline for the category, although prices are still 35% higher than they were a year ago.

CarMax also faced higher spending in the quarter, which rose 22.5% to nearly $621 million. The company said it was spending more on its technology platforms, Edmunds consolidation and advertising, and had seen additional costs resulting from trial purchases, new stores, experience centers customer and compensation increases.

The company reported total gross profit of $711 million in the quarter, up about 11% year-over-year. Retail used vehicle gross margin fell 0.2% to $426.6 million due to a combination of lower used vehicle sales volume from CarMax and an increase in profit per vehicle sold from $109 to $2,195.

Total wholesale vehicle gross margin jumped 73% to $177.5 million in the quarter. Earnings per vehicle increased $201 to $1,191.

CarMax said other gross profit fell 3.8% to $106.9 million as its service margins narrowed due to lower used vehicle sales and COVID-19 affecting its workforce. of technicians and its reconditioning capabilities.

CarMax’s selling, general and administrative expenses as a percentage of gross margin were 87.3% in the quarter, compared to 79% in the prior year period.

Results from the Business Results Report include:

4th quarter net profit: $159.8 million, compared to $209.9 million the previous year.

4th quarter net sales: $7.7 billion, up 49% from the previous year.

Net profit for the year: $1.15 billion, compared to $746.9 million the previous year.

Net turnover for the financial year: $31.9 billion, up 68.3% from the previous year.

CarMax ranks #1 on Automotive News‘ list of top 100 retailers ranked by used vehicle sales, with retail sales of 832,640 used vehicles in 2020.

Bloomberg contributed to this report.