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    Carmax Inc (KMX)

    New Share Buyback Program

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    CarMax, Inc. is the largest retailer of used vehicles in the United States, operating through two main segments: CarMax Sales Operations and CarMax Auto Finance (CAF) . The company specializes in the retail and wholesale sales of used vehicles, along with related products and services such as extended protection plans and vehicle repair services . CarMax also offers financing options through its CAF segment, which provides competitive financing solely to customers purchasing retail vehicles from CarMax .

    1. CarMax Sales Operations - Encompasses all aspects of auto merchandising and service operations, including retail sales of used vehicles, wholesale vehicle sales, and related products and services such as extended protection plans, vehicle repair services, and advertising and subscription revenues.

      • Retail Sales of Used Vehicles - Offers a wide selection of used vehicles for purchase by consumers.
      • Wholesale Vehicle Sales - Facilitates the sale of vehicles to other dealers through auctions.
      • Extended Protection Plans (EPPs) - Provides additional coverage options for vehicle protection.
      • Vehicle Repair Services - Offers maintenance and repair services for vehicles.
      • Advertising and Subscription Revenues - Generates income through advertising and subscription-based services.
    2. CarMax Auto Finance (CAF) - Provides financing options exclusively to customers buying retail vehicles from CarMax, capturing additional profits and cash flows by offering competitive financing solutions.

    NamePositionStart DateShort Bio
    William D. NashPresident and Chief Executive Officer1997William D. Nash joined CarMax in 1997 as an auction manager. He held various positions, including Vice President and Senior Vice President of Merchandising, and Senior Vice President, Human Resources and Administrative Services. He became President in February 2016 and has been CEO since September 2016 .
    Enrique N. Mayor-MoraExecutive Vice President and Chief Financial Officer2011Enrique N. Mayor-Mora joined CarMax in 2011 as Vice President of Finance. He was promoted to Vice President and Treasurer in 2016, then to Senior Vice President and Chief Financial Officer in 2019, and to Executive Vice President and Chief Financial Officer in 2022 .
    James LyskiExecutive Vice President and Chief Innovation and Strategy Officer2014James Lyski joined CarMax in August 2014 as Senior Vice President and Chief Marketing Officer. He was promoted to Executive Vice President in 2017 and transitioned to the role of Chief Innovation and Strategy Officer in 2023 .
    Charles Joseph WilsonExecutive Vice President and Chief Operating Officer1995Charles Joseph Wilson joined CarMax in 1995 as a buyer-in-training. He was promoted through various roles, including regional vice president of merchandising, and eventually to Executive Vice President and Chief Operating Officer in 2022 .
    Shamim MohammadExecutive Vice President and Chief Information and Technology Officer2012Shamim Mohammad joined CarMax in 2012 as Vice President of Application Development and IT Planning. He was promoted to Senior Vice President and Chief Information Officer in 2014, then to Senior Vice President and Chief Information and Technology Officer in 2018, and to Executive Vice President and Chief Information and Technology Officer in 2021 .
    1. Your credit penetration remains in the low 70% range, while an online peer has expanded theirs to the mid-80s; what specific constraints are preventing you from increasing your credit penetration to similar levels, and what strategies are you implementing to address this gap?
    2. With worsening trends in the broader auto loan market and Tier 3 penetration down to about 7%, how are you adjusting your underwriting standards and business planning to mitigate potential risks from a weakening credit environment, and what further cost efficiencies can you realize?
    3. Given the current headwinds in credit quality and increased loan loss provisions, does it make strategic sense to push forward with your full-spectrum lending initiative now, or should you reconsider its timing to avoid potential negative impacts?
    4. Can you provide more details on how you are rethinking or retooling your reconditioning operations to improve efficiencies and margins, and what specific actions are being taken to enhance profitability in this area?
    5. Regarding customers who are not procuring financing through CarMax and instead use third-party lenders or pay cash, what strategies do you have to better capture this higher-end, rate-sensitive customer segment and increase your overall financing penetration?
    Program DetailsProgram 1Program 2
    Approval DateOctober 23, 2018 April 2022
    End Date/DurationNo expiration date No expiration date
    Total additional amount$2 billion $2 billion
    Remaining authorization$2.15 billion as of 2024-12-21 $2.15 billion as of 2024-12-21
    DetailsPart of capital allocation strategy Part of capital allocation strategy
    YearAmount Due (in billions)Debt TypeInterest Rate% of Total Debt
    20240.525Current portion of long-term debt and non-recourse notes payableVariable/Fixed2.8% = (0.525 / 18.70) * 100
    20260.700Term Loan5.58%3.7% = (0.700 / 18.70) * 100
    20260.2004.17% Senior Notes4.17%1.1% = (0.200 / 18.70) * 100
    20280.2004.27% Senior Notes4.27%1.1% = (0.200 / 18.70) * 100
    203116.560Non-Recourse Notes PayableFixed88.6% = (16.560 / 18.70) * 100
    20590.505Financing ObligationsVarying2.7% = (0.505 / 18.70) * 100

    Competitors mentioned in the company's latest 10K filing.

    • Franchised dealers: Sell both new and used vehicles and are part of the highly fragmented U.S. used car marketplace .
    • Online and mobile sales platforms: Facilitate increased competition in the used car marketplace .
    • Independent used car dealers: Compete in the U.S. used car marketplace .
    • Private parties: Compete in the U.S. used car marketplace .
    • Banks and credit unions: Provide direct financing to customers purchasing used cars, competing with CarMax Auto Finance .
    • New car dealers: Leverage franchise relationships to brand certain used cars as "certified pre-owned," providing a competitive advantage .
    • Companies with online focused business models: Compete in direct sales and consumer-to-consumer facilitation, impacting CarMax's business model .
    • E-commerce businesses: Enter the online new and used vehicle markets, potentially offering a greater inventory and superior online experience .
    • Automotive in-person and online auctions: Compete with CarMax's wholesale auctions .
    NameStart DateEnd DateReason for Change
    KPMG LLP1996 PresentCurrent auditor

    Recent developments and announcements about KMX.

    Financial Reporting

      Earnings Call

      ·
      Dec 19, 2024, 6:09 PM

      The recent earnings call for CarMax (KMX) highlighted several key points regarding the company's financial performance and strategic initiatives. CarMax reported a third-quarter net earnings per diluted share of $0.81, marking a 56% increase compared to the previous year. Total gross profit rose by 11% to $678 million, with used retail margins increasing by 7% due to higher volume and stable per unit margins. Wholesale vehicle margins also grew by 12% .

      Management expressed confidence in their sales momentum and market share gains, noting that the last two quarters have shown positive trends. They plan to update market share figures at the end of the fiscal year, assuming no significant price swings occur .

      Regarding forward guidance, CarMax is optimistic about the upcoming tax season, emphasizing the importance of inventory flexibility to adapt to market conditions. They are preparing for a potentially strong tax season by building up inventory, which is a typical seasonal strategy .

      In terms of strategic initiatives, CarMax is focusing on expanding its store footprint beyond the current 249 locations, with plans to reach 300 stores in the long term. They are also leveraging their omnichannel model to enhance efficiency and customer experience, which is expected to drive further growth .

      Analyst questions during the call touched on various topics, including the impact of market conditions on wholesale operations, inventory management strategies, and the company's approach to cost management and efficiency improvements. Management highlighted their efforts in improving conversion rates and reducing friction in the customer experience, which have contributed to their positive performance .

      Overall, CarMax's earnings call reflected a strong financial performance and a strategic focus on growth and efficiency, positioning the company well for future success.

      Earnings Report

      ·
      Dec 19, 2024, 12:23 PM

      CarMax, Inc. (NYSE:KMX) has released its third quarter fiscal year 2025 earnings results, reporting significant growth and positive trends in its financial performance. Net earnings per diluted share increased by 55.8% to $0.81, compared to $0.52 in the same quarter last year . The company achieved over 50% earnings growth, driven by gains across its business segments .

      Key Highlights:

      • Retail used unit sales increased by 5.4%, while comparable store used unit sales rose by 4.3%. Wholesale units saw a 6.3% increase .
      • Total gross profit reached $677.6 million, marking a 10.6% increase, supported by strong unit volumes and margin performance .
      • CarMax Auto Finance (CAF) income grew by 7.6% to $159.9 million, attributed to an increase in net interest margin percentage and average managed receivables .
      • The company repurchased $114.8 million in shares of common stock during the quarter .

      Trends and Strategic Insights:

      • The company noted a more stable environment for vehicle valuations, which contributed to robust earnings per share (EPS) growth .
      • CarMax continues to leverage its omni-channel platform, which is a key differentiator in driving growth and accessing a large market within the industry .

      Overall, CarMax's third quarter results reflect strong operational execution and strategic positioning in the used vehicle market, with significant improvements in sales, profitability, and financial management .

    Financial Actions

      New Share Buyback Program

      ·
      Dec 19, 2024, 12:21 PM

      CarMax has announced a new buyback program as part of its financial strategy. During the third quarter of fiscal year 2025, CarMax repurchased 1.5 million shares of common stock for $114.8 million. As of November 30, 2024, the company had $2.04 billion remaining available for repurchase under the outstanding authorization .