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GuruFocus has detected 1 Warning Sign with CarMax Inc \$KMX.
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CarMax Inc (NYSE:KMX)
Cost of Goods Sold
\$13,692 Mil (TTM As of Feb. 2017)

CarMax Inc's cost of goods sold for the three months ended in Feb. 2017 was \$3,488 Mil. Its cost of goods sold for the trailing twelve months (TTM) ended in Feb. 2017 was \$13,692 Mil.

Cost of Goods Sold is directly linked to profitability of the company through Gross Margin. CarMax Inc's Gross Margin for the three months ended in Feb. 2017 was 13.88%.

Cost of Goods Sold is also directly linked to Inventory Turnover. CarMax Inc's Inventory Turnover for the three months ended in Feb. 2017 was 1.57.

Definition

Cost of goods sold (COGS) refers to the Inventory costs of those goods a business has sold during a particular period.

CarMax Inc Cost of Goods Sold for the trailing twelve months (TTM) ended in Feb. 2017 was 3553.749 (May. 2016 ) + 3451.886 (Aug. 2016 ) + 3198.389 (Nov. 2016 ) + 3487.8 (Feb. 2017 ) = \$13,692 Mil.

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

Explanation

Cost of Goods Sold is directly linked to profitability of the company through Gross Margin.

CarMax Inc's Gross Margin for the three months ended in Feb. 2017 is calculated as:

 Gross Margin = (Revenue - Cost of Goods Sold) / Revenue = (4049.96 - 3487.8) / 4049.96 = 13.88 %

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

A company that has a moat can usually maintain or even expand their Gross Margin. A company can increase its Gross Margin in two ways. It can increase the prices of the goods it sells and keeps its Cost of Goods Sold unchanged. Or it can keep the sales price unchanged and squeeze its suppliers to reduce the Cost of Goods Sold. Warren Buffett believes businesses with the power to raise prices have moats.

Cost of Goods Sold is also directly linked to another concept called Inventory Turnover:

CarMax Inc's Inventory Turnover for the three months ended in Feb. 2017 is calculated as:

 Inventory Turnover = Cost of Goods Sold / Average Inventory = 3487.8 / 2215.369 = 1.57

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

Inventory Turnover measures how fast the company turns over its inventory within a year. A higher inventory turnover means the company has light inventory. Therefore the company spends less money on storage, write downs, and obsolete inventory. If the inventory is too light, it may affect sales because the company may not have enough to meet demand.

Usually retailers pile up their inventories at holiday seasons to meet the stronger demand. Therefore, the inventory of a particular quarter of a year should not be used to calculate inventory turnover. An average inventory is a better indication.

Related Terms

Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

CarMax Inc Annual Data

 Feb08 Feb09 Feb10 Feb11 Feb12 Feb13 Feb14 Feb15 Feb16 Feb17 COGS 7,127 6,006 6,371 7,674 8,625 9,498 10,926 12,381 13,131 13,692

CarMax Inc Quarterly Data

 Nov14 Feb15 May15 Aug15 Nov15 Feb16 May16 Aug16 Nov16 Feb17 COGS 2,959 3,038 3,471 3,364 3,080 3,217 3,554 3,452 3,198 3,488
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