Financial Performance

Carmax Rides Gulf Storms, Stock Rises 7.6%

Investors had been nervous about Hurricane Harvey but Carmax's Q2 results showed a negligible impact from the storm.
Matthew HellerSeptember 22, 2017

Carmax on Friday posted better-than-expected quarterly results that showed minimal impact from Hurricane Harvey and sent its stock up more than 7%.

The largest U.S. used-car retailer said earnings increased 16.7% to 98 cents per share, while net sales rose 9.7% to $4.39 billion. Analysts had expected earnings of 95 cents per share on revenue of $4.26 billion.

Total used-car sales were up 11.1% and comparable store sales, a key retail metric, increased 5.3%.

Drive Business Strategy and Growth

Drive Business Strategy and Growth

Learn how NetSuite Financial Management allows you to quickly and easily model what-if scenarios and generate reports.

The comparable store sales performance reflected continued solid improvement in conversion resulting from strong execution by our store teams and our digital initiatives,” Carmax said in a news release.

The company also noted that its six stores in Houston were closed most of the last week of the quarter due to Hurricane Harvey but that had only “a modest adverse effect” on comp sales.

As TheStreet reports, some investors had been nervous about how much Harvey and Hurricane Irma would drag on Carmax’s results but the quarter was “even better than most were hoping to see” and the negligible impact of Harvey “reassured shareholders that the company’s success story remains intact.”

In trading Friday, Carmax shares rose 7.6% to $74.06. After dipping early in 2017, the stock has climbed nearly 24% since mid-April.

Carmax’s second-quarter results also showed that average used-car selling prices rose 0.7% to $19,667, ending a streak of quarterly declines. Wholesale vehicle prices kept falling, posting a 3% drop to $4,957, but gross profit per unit from the wholesale business jumped by $80 per unit to $950.

Wholesale vehicle unit sales increased 0.4% as growth in Carmax’s store base and an increase in its appraisal buy rate were offset by a reduction in appraisal traffic.

The company is facing new competititive threats including Carvana, which is offering an alternative to the traditional car-buying experience. But The Motley Fool said Carvana “will have to deal with the same general business challenges that CarMax does, and it will inevitably make some mistakes in climbing the learning curve. That should give CarMax time to formulate a strategy to respond.”