CarMax posted a 14.6% increase in earnings per share to $0.47 in
the third quarter of fiscal 2014, missing the Zacks Consensus
Estimate by $0.01. Net sales and operating revenues rose 13% to
$2.9 billion, missing the Zacks Consensus Estimate of $3.1 billion.
The year-over-year improvement in revenues was mainly due to
increases in used-vehicle sales and new vehicle sales. In the long
run, CarMax's focus on the used-vehicle market and its aggressive
store expansion strategy should help it outperform peers. However,
we are concerned about the pressure on used-vehicle margins, high
competition in the used-car market and high cash outflow of the
company. As a result, we have maintained our Neutral recommendation
Headquartered in Richmond, Va., CarMax Inc. (KMX) operates as a
specialty retailer of used vehicles, such as, cars and light trucks
as well as new vehicles. The range of vehicles includes both
domestic and imported 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., California CarMax
Auto Superstores California LLC, California 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. The company sells vehicles, purchased through the
in-store appraisal process, that do not meet its retail standard
through on-site wholesale auctions.
In the first 9 months of fiscal 2014, CarMax retailed 394,073
used vehicles, 5,954 new vehicles and 262,342 wholesale vehicles.
As of Nov 30, 2013, the company operated 126 used car superstores
in 63 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 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 9 months of fiscal 2014, Used Vehicle generated
81.5% of revenues, Wholesale Vehicle 14.8%, New Vehicle 1.7% and
Other Sales and Revenues (such as commission on the sale of
extended service plans (ESP), service department sales and
third-party finance fees), 2%.
CarMax Inc. (KMX): Read the Full Research
CARMAX GP (CC) (KMX): Free Stock Analysis
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