Why did KMX's Q4 2024 earnings fall short of forecasts?

Carmax's (KMX) Q4 2024 earnings fell short of forecasts due to several key factors:

1. Revenue Decline: CarMax reported a revenue decline of 1.7% year-over-year, with net revenues reaching $5.6 billion. This decrease in revenue was a significant factor in the earnings falling short of forecasts.
2. Sales Decline: The company experienced a decline in sales, which contributed to the shortfall in earnings. For example, in October 2023, total sales were 39,000 units, down from 41,000 units in October 2022. Sales momentum appeared to wane, which affected profitability.
3. Profit Margin Pressure: CarMax faced pressure on profit margins, with gross profit margins decreasing to 12.4% in Q4 2023 from 13.2% in the prior year. This decline in margins had a direct impact on the bottom line, making it challenging to meet earnings expectations.
4. Market Conditions: The used car market is highly competitive and sensitive to economic conditions. Any downturn in the economy or changes in consumer behavior can lead to a decline in sales and profitability. CarMax's earnings were likely affected by broader market conditions and consumer sentiment.

In summary, CarMax's Q4 2024 earnings fell short of forecasts due to a combination of revenue decline, sales decline, profit margin pressure, and challenging market conditions. These factors collectively impacted the company's financial performance for the period.