CarMax (KMX) Q2 Earnings call transcript Sep 26, 2025

CarMax, the leading used car retailer, reported a solid second quarter performance despite industry-wide auto loan loss pressure. The company achieved positive sales trends, strong margins, and cost efficiencies, leading to double-digit earnings per share growth.

Key Highlights from the Earnings Call

Retail Sales and Margins: CarMax reported a 5.1% increase in total unit sales and a 4.3% increase in used unit comps. Retail gross profit per used unit remained consistent at $2,269, while retail gross profit per unit declined by 5% due to lower average selling prices. Retail sales showed improvement sequentially, with unit sales down only 0.3% versus the same period last year. Wholesale Performance: The company purchased approximately 300,000 vehicles, a 3% increase from last year, with more than half coming through its online instant appraisal experience. Wholesale gross profit per unit remained stable at $975. Finance Business: CarMax Auto Finance (CAF) originated approximately $2.2 billion, with sales penetration of 42%. The weighted average contract rate charged to new customers increased by 40 basis points. Despite the increase in loan loss provision, CAF income remained at $116 million, reflecting industry-wide challenges. Operational Efficiencies: CarMax continues to focus on operational efficiencies, including the implementation of a new order processing system and the expansion of its omnichannel retail experience. The company also noted improvements in customer shopping accounts and the introduction of a new knowledge management system.

Market Outlook and Future Prospects

CarMax is optimistic about the future, with a diversified business model and a focus on operational efficiencies. The company expects continued improvement in sales performance, driven by its omnichannel retail experience and logistics optimization efforts. Despite challenges in the auto loan market, CarMax is positioning itself for growth and is exploring opportunities in the full-spectrum lending market.

Investor and Analyst Questions

During the call, analysts raised questions about unit comps, the market environment, and the company's credit strategy. CarMax executives provided insightful responses, addressing concerns about the impact of day-of-the-week headwinds on sales and the company's strategies to manage credit risk and tightening underwriting standards.

Conclusion

CarMax's strong second quarter performance and strategic initiatives demonstrate the company's resilience and adaptability in a challenging industry environment. With a focus on operational efficiencies, strategic growth opportunities, and a robust finance business, CarMax is well-positioned for future success.