CarMax Shares Soar 10.01% on Strong Q1 Earnings

CarMax Inc. (KMX) shares surged 10.01% in pre-market trading on June 20, 2025, driven by a strong first-quarter performance for the fiscal year 2026.

CarMax reported a 42.3% year-over-year increase in earnings per share (EPS) to $1.38, surpassing the estimated EPS of $1.21. The company's revenue reached $7,546.5 million, exceeding market expectations. This robust performance was fueled by operational discipline and strategic execution, allowing CarMax to maintain profitability despite rising interest rates and inflationary pressures.

The company's success in the first quarter was marked by a 680 basis-point expansion in the selling, general, and administrative (SG&A) margin and record retail unit sales. CarMax's ability to leverage its omni-channel strategy, which involves digital tools in 80% of transactions, has been a key driver of its growth. This strategy has not only attracted younger, tech-savvy buyers but also reduced customer acquisition costs and improved retention.

CarMax Auto Finance (CAF) also played a significant role in the company's performance, with income rising 8.2% to $159.3 million in the fourth quarter of fiscal year 2025. The "full credit spectrum" model expanded access to subprime borrowers without excessive risk, boosting penetration to 41.8%. Despite an increase in loan loss provisions, the company's proactive risk management strategies, such as reclassifying non-prime loans as "held for sale," mitigated balance sheet exposure and reduced provisioning needs.

CarMax's strategic resilience is evident in its ability to navigate macroeconomic challenges. The company's disciplined capital allocation, with $575 million in fiscal 2026 investments, will boost capacity while maintaining a manageable debt-to-equity ratio. This disciplined expansion avoids overextending the balance sheet and positions CarMax to outpace peers in a slowing market.