We are upgrading our recommendation on CarMax to Outperform from
Neutral based on the company's aggressive store expansion and share
repurchase strategy which will help it outperform peers. CarMax
posted earnings per share of $0.60 in the third quarter of fiscal
2015, surpassing the Zacks Consensus Estimate of $0.54. The company
recorded better results in the reported quarter due to strong
performance in used, wholesale and CarMax Auto Finance operations,
together with the increase in its store base and the ongoing share
repurchase program. Net sales and operating revenues rose 15.8% to
$3.41 billion, exceeding the Zacks Consensus Estimate of $3.26
Headquartered in Richmond, VA, CarMax Inc. (KMX) operates as a
specialty retailer of used vehicles as well as new vehicles. The
range of vehicles includes both cars as well as light trucks. It is
the largest retailer of used vehicles in the U.S.
CarMax is a holding company, which conducts its operations
through wholly owned subsidiaries CarMax Auto Superstores Inc.,
Virginia CarMax Auto Superstores West Coast Inc., Virginia CarMax
Auto Superstores California LLC, Virginia CarMax Auto Superstores
Services Inc., Virginia CarMax Business Services LLC, Delaware and
Glen Allen Insurance Ltd., Bermuda.
CarMax acquires its used-vehicle inventory directly from
consumers through its in-store appraisal process as well as from
other sources including local and regional auctions, wholesalers,
franchised and independent dealers and fleet owners, such as
leasing and rental companies. The company conducts the in-store
appraisal process through its car-buying centers (about five)
intended to increase appraisal traffic and generate incremental
vehicle purchases by individual consumers, but not sale of
vehicles. Out of the vehicles purchased through the in-store
appraisal process, those which do not meet the company's retail
standard are sold through on-site wholesale auctions.
In the first nine months of fiscal 2015, CarMax sold 433,011
used vehicles, 7,187 new vehicles and 286,075 wholesale vehicles.
As of Dec 19, 2014, the company operated 143 used-car superstores
across 72 markets. Most of the company's store locations are in the
southeastern U.S. Chicago, Los Angeles, Houston, Dallas and
Washington D.C. are some of the cities where the company has a
CarMax conducts its used-vehicle operations in three basic
retail formats: mega, standard and satellite stores. Mega
superstores are approximately 70,000 95,000 square feet, standard
superstores span 40,000 60,000 square feet and satellite
superstores are spread across approximately 10,000 20,000 square
CarMax also provides customers with a full range of related
services including financing of vehicle purchases and sale of
extended warranties, accessories and vehicle repair services
through CarMax Auto Finance (CAF).
In the first nine months of fiscal 2015, Used Vehicle generated
81.6% of revenues, Wholesale Vehicle contributed to 14.5%, New
Vehicle generated 1.8% and Other Sales and Revenues (such as
commission on the sales of extended service plans (ESP), service
department sales and third-party finance fees) generated 2.1%.
CarMax Inc. (KMX): Read the Full Research
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CARMAX GP (CC) (KMX): Free Stock Analysis
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