Non-Prime Securitization Impact
Q: Will non-prime securitization drive growth and profitability?
A: Management is excited about the non-prime securitization program, believing it will enable growth in the lower credit spectrum and expand the higher prime segment. For every one point of sales gained, they expect to drive $10 million to $12 million of value to CarMax upon reaching steady state. They see substantial long-term potential and aim to grow beyond the current 43% of sales financed in-house, though significant growth may not occur until after the current year ,.

Market Share Trends
Q: How is CarMax performing in market share?
A: CarMax's market share in the first calendar quarter of 2024 was higher than in the fourth quarter of 2023 and similar to the same quarter last year. Management notes that market share is volatile over short periods and prefers to assess it annually unless significant macro factors arise. They attribute recent market share dynamics to factors like price corrections and a greater proportion of 10-plus-year-old cars being sold, a segment where CarMax has less presence , ,.

Sales Trends and Outlook
Q: Are sales and comps improving?
A: Management reports improved comp trends, with mid-single-digit negative comps in the fourth quarter but better performance in the back half. In June month-to-date, they are running slightly positive comps, showing continued improvement ,. They are encouraged by the trajectory but cautious about future projections.

Cost-Saving Initiatives
Q: What's the impact of cost-saving in logistics and reconditioning?
A: CarMax is targeting a couple of hundred dollars per retail unit in cost savings over the next one to two years through initiatives in reconditioning and logistics. While significant, management is undecided whether to pass these savings to customers through pricing or take them to the bottom line, considering factors like affordability and elasticity.

Strategy and Operations
Q: Is the current strategy effective amid market challenges?
A: Management feels confident about their strategy, emphasizing that recent challenges are due to macro factors like big price corrections and affordability issues with late-model cars. They have strengthened the company by expanding sourcing, focusing on cost of goods sold, and enhancing financing options. They believe these actions will pay dividends as sales recover.

SG&A Expenses
Q: How will SG&A expenses trend this year?
A: CarMax managed to reduce SG&A expenses year-over-year in the first quarter after adjustments. For the rest of the year, they expect total SG&A dollars to be more challenging but are focused on active cost management to leverage low single-digit gross profit growth.

Vehicle Supply Dynamics
Q: Are there supply issues affecting vehicle availability?
A: Management states they are not having problems sourcing cars. Any supply impact relates to affordability, particularly in older vehicles that meet CarMax's standards ,. They see improving supply dynamics as the SAAR increases, which should eventually bring down used car prices, benefiting both the industry and CarMax.

Dealer Sourcing Sustainability
Q: Is sourcing vehicles from dealers sustainable and beneficial?
A: CarMax is encouraged by dealer sourcing to diversify acquisition channels. Vehicles sourced from dealers have a higher percentage of retail-ready cars, more profitable than auction purchases but less so than consumer purchases. Active dealer users have increased by roughly 50% in the last year, showing positive traction.

Advertising Spend
Q: How is advertising spend per unit trending?
A: Advertising spend per total unit was up about 5% year-over-year but is considered a benign fluctuation. Management is committed to managing advertising spend at roughly $200 per total unit for the entire year.

Impact of CDK Software Issues
Q: Does the CDK software issue affect CarMax?
A: CarMax does not use CDK as their DMS, so the impact is minor. The issue slightly affects them through slowed parts and title work from dealers who are affected, but it's minimal overall.