CarMax posted an 18.8% increase in earnings per share to $0.76 in
the first quarter of fiscal 2015. Earnings surpassed the Zacks
Consensus Estimate of $0.66. Net sales and operating revenues rose
13.3% to $3.75 billion, also beating the Zacks Consensus Estimate
of $3.57 billion. The year-over-year improvement in revenues was
mainly due to increased used vehicle sales, new vehicle sales and
wholesale 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
high 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 2014, CarMax retailed 526,929 used vehicles, 7,761 new
vehicles and 342,576 wholesale vehicles. As of Feb 28, 2014, the
company operated 131 used car superstores in 64 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 strong presence.
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 2014, Used Vehicle generated 82% of revenues, Wholesale
Vehicle 14.5%, 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), 1.8%.
CarMax Inc. (KMX): Read the Full Research
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CARMAX GP (CC) (KMX): Free Stock Analysis
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