CarMax Group Earnings: Shrinking Margins for Fifth Consecutive Quarter, Net Income Falls

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S&P 500 (NYSE:SPY) component CarMax Group (NYSE:KMX) reported its results for the second quarter. CarMax is a retailer of used vehicles in the United States. The company also sells new vehicles under franchise agreements with Chrysler, General Motors, Nissan, and Toyota.

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CarMax Group Earnings Cheat Sheet

Results: Net income for CarMax Group fell to $111.6 million (48 cents per share) vs. $111.9 million (48 cents per share) a year earlier. This is a decline of 0.3% from the year-earlier quarter.

Revenue: Rose 6.6% to $2.76 billion from the year-earlier quarter.

Actual vs. Wall St. Expectations: CarMax Group fell short of the mean analyst estimate of 51 cents per share. Analysts were expecting revenue of $2.81 billion.

Quoting Management: “We are pleased with our improved retail sales in the second quarter, as used unit comps strengthened and we continued to open new stores,” said Tom Folliard, president and chief executive officer. “Net earnings were flat, as the contributions from the growth in retail sales and CAF income were offset by higher SG&A costs, which were pressured by the ramp in our store growth rate, and the tough comparisons in our wholesale operations.”

Key Stats:

Last quarter marked the fifth straight quarter that the company saw shrinking gross margins, as gross margin fell 0.3 percentage point to 13.3% from the year-earlier quarter. In that span, margins have contracted an average of 0.7 percentage point per quarter on a year-over-year basis.

Revenue has risen the past four quarters. Revenue increased 3.5% to $2.77 billion in the first quarter. The figure rose 9.9% in the fourth quarter of the last fiscal year from the year earlier and climbed 6.7% in the third quarter of the last fiscal year from the year-ago quarter.

The company has now seen net income fall in each of the last two quarters. In the first quarter, net income fell 4.4% from the year-earlier quarter.

The company fell short of estimates last quarter after being in line with expectations the quarter before with net income of 52 cents.

Looking Forward: Over the last 30 days, analysts have not been optimistic about the company’s next-quarter performance. The average estimate for the third quarter is now 39 cents per share, down from 40 cents. The average estimate for the fiscal year is now $1.87 per share, down from $1.93 sixty days ago.

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(Company fundamentals provided by Xignite Financials. Earnings estimates provided by Zacks)

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