CarMax, the used-car retailer, reported a decline in earnings for the latest quarter due to lower vehicle sales and reduced selling prices. Here are the key details:
In the second quarter, net earnings dropped to $118.6 million, or 75 cents a share, compared to $125.9 million, or 79 cents, in the same period last year. Analysts had expected earnings of $124.1 million.
Overall revenue decreased by 13% from the previous year, reaching $7.07 billion in the three months ending on August 31. This figure slightly exceeded analysts' mean forecast of $7.02 billion. The company experienced an 11% decrease in used-vehicle sales and a 22% decrease in wholesale vehicle sales during the quarter.
Sales Volume Challenges
The total retail used-vehicle sales declined by 7.4%, with 200,825 units sold compared to the previous year. CarMax attributed this decline to affordability challenges faced by consumers, such as widespread inflationary pressures, higher interest rates, tightened lending standards, and prolonged weakness in consumer confidence. Additionally, wholesale vehicle sales were down by 11%, with 141,837 units sold.
Decrease in Selling Prices
CarMax reported a decrease in the average selling price of used vehicles by approximately $1,200 per unit for the quarter, representing a 4% decrease. The average wholesale selling price also decreased by approximately $1,300, or 12%.
Impact on Supply
During the second quarter, CarMax purchased 292,000 vehicles from consumers and dealers, marking a 15% decline compared to the same period last year. This decrease was influenced by steep market depreciation. Out of these vehicles, 273,000 were bought from consumers, while 19,000 were acquired through dealers. This signifies a 16% decrease and a 5.3% decrease, respectively.
CarMax continues to face challenges in the used-car market as consumers grapple with affordability concerns.