CarMax posted an 18.8% increase in earnings per share to $0.76 in
the first quarter of fiscal 2015, surpassing the Zacks Consensus
Estimate of $0.66. Net sales and operating revenues rose 13.3% to
$3.75 billion, beating the Zacks Consensus Estimate of $3.57
billion. The year-over-year improvement in revenues was mainly
attributable to increased used vehicle, new vehicle and wholesale
vehicle sales. Over the long haul, CarMax's focus on the
used-vehicle market and its aggressive store expansion strategy
should help it outperform peers. However, we are concerned about
intense competition in the used-car market and the high cash
outflow of the company. As a result, we have maintained our Neutral
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 first quarter of fiscal 2015, CarMax sold 150,528 used
vehicles, 2,597 new vehicles and 97,098 wholesale vehicles. As of
May 31, 2014, the company operated 135 used car superstores across
67 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 first quarter of fiscal 2015, Used Vehicle generated 81.6% of
revenues, Wholesale Vehicle 14.5%, New Vehicle 1.9% and Other Sales
and Revenues (such as commission on the sale of extended service
plans (ESP), service department sales and third-party finance fees)
CarMax Inc. (KMX): Read the Full Research
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