CarMax Shares Drop 20% After Disappointing Quarterly Results
Shares of CarMax experienced a significant decline, dropping more than 20% in early trading on Thursday, following the company’s failure to meet Wall Street’s expectations for quarterly earnings and revenue. The stock fell below $45, marking its lowest price since March 2020, a period when the COVID-19 pandemic severely impacted U.S. auto production and retail operations. This decline adds to a troubling trend, with CarMax shares down about 46% in 2023, resulting in a market capitalization of less than $6.7 billion.
In its latest report for the second fiscal quarter ending on August 31, 2023, CarMax reported earnings per share of 99 cents and revenue of approximately $6.6 billion, reflecting a drop of 6% from the same period last year. Analysts surveyed by LSEG had anticipated earnings per share of $1.05 and revenue of $7.01 billion.
Challenges Affecting Performance
CarMax’s Chief Executive Officer, Bill Nash, characterized the recent quarter as “challenging” in the company’s quarterly release. Key performance indicators, including sales and net income, also showed declines compared to the previous year. The company’s total vehicle sales fell by 4.1% year-over-year, contributing to a substantial 28% decrease in net income, which stood at $95.4 million for the quarter.
The negative results had a ripple effect across the auto retail sector. Shares of competing retailers such as Group 1 Automotive, Penske Automotive Group, Sonic Automotive, and Lithia Motors all experienced declines of around 2% or less shortly after CarMax’s announcement. AutoNation and Carvana also saw their stocks dip by roughly 4% following the news, as many investors view CarMax’s performance as a critical indicator for the broader automotive retail market.
Investors and analysts will be closely monitoring the upcoming quarterly reports from other auto retailers to gauge the industry’s overall health in the wake of CarMax’s disappointing results. The sharp decline in CarMax shares serves as a reminder of the volatile nature of the auto retail sector and the challenges it faces amid evolving consumer preferences and economic conditions.
