Switch to:
CarMax Inc (NYSE:KMX)
Gross Margin
13.38% (As of May. 2014)

Gross Margin is calculated as gross profit divided by its revenue. CarMax Inc's gross profit for the three months ended in May. 2014 was $502 Mil. CarMax Inc's revenue for the three months ended in May. 2014 was $3,750 Mil. Therefore, CarMax Inc's Gross Margin for the quarter that ended in May. 2014 was 13.38%.

Warning Sign:

CarMax Inc gross margin has been in long term decline. The average rate of decline per year is -1.8%.

KMX' s 10-Year Gross Margin Range
Min: 8.84   Max: 14.71
Current: 13.08

8.84
14.71

During the past 13 years, the highest Gross Margin of CarMax Inc was 14.71%. The lowest was 8.84%. And the median was 12.66%.

KMX's Gross Marginis ranked lower than
100% of the Companies
in the Global Auto & Truck Dealerships industry.

( Industry Median: vs. KMX: 13.08 )

CarMax Inc had a gross margin of 13.38% for the quarter that ended in May. 2014 => No sustainable competitive advantage

The 3-Year average Growth Rate of Gross Margin for CarMax Inc was -1.80% per year.


Definition

Gross Margin is the percentage of Gross Profit out of sales or Revenue.

CarMax Inc's Gross Margin for the fiscal year that ended in Feb. 2014 is calculated as

Gross Margin (A: Feb. 2014 )=Gross Profit (A: Feb. 2014 ) / Revenue (A: Feb. 2014 )
=1648.7 / 12574.299
=(Revenue - Cost of Goods Sold) / Revenue
=(12574.299 - 10925.598) / 12574.299
=13.11 %

CarMax Inc's Gross Margin for the quarter that ended in May. 2014 is calculated as

Gross Margin (Q: May. 2014 )=Gross Profit (Q: May. 2014 ) / Revenue (Q: May. 2014 )
=501.7 / 3750.196
=(Revenue - Cost of Goods Sold) / Revenue
=(3750.196 - 3248.465) / 3750.196
=13.38 %

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

A positive Gross Profit is only the first step for a company to make a net profit. The gross profit needs to be big enough to also cover related labor, equipment, rental, marketing/advertising, research and development and a lot of other costs in selling the products.


Explanation

Warren Buffett believes that firms with excellent long term economics tend to have consistently higher margins.

Durable competitive advantage creates a high Gross Margin because of the freedom to price in excess of cost. Companies can be categorized by their Gross Margin

1. Greater than 40% = Durable competitive advantage
2. Less than 40% = Competition eroding margins
3. Less than 20% = no sustainable competitive advantage
Consistency of Gross Margin is key

CarMax Inc had a gross margin of 13.38% for the quarter that ended in May. 2014 => No sustainable competitive advantage


Be Aware

If a company loses its competitive advantages, usually its gross margin declines well before its sales declines. Watching Gross Margin and Operating Margin closely helps avoid value trap situations.


Related Terms

Operating Margin, Cost of Goods Sold, Gross Profit, Revenue


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

CarMax Inc Annual Data

Feb05Feb06Feb07Feb08Feb09Feb10Feb11Feb12Feb13Feb14
Gross Margin 12.3612.6313.0113.0813.8814.7114.5013.7813.3613.11

CarMax Inc Quarterly Data

Feb12May12Aug12Nov12Feb13May13Aug13Nov13Feb14May14
Gross Margin 13.6613.7713.3413.2713.0613.5313.4012.9812.4913.38
Get WordPress Plugins for easy affiliate links on Stock Tickers and Guru Names | Earn affiliate commissions by embedding GuruFocus Charts
GuruFocus Affiliate Program: Earn up to $400 per referral. ( Learn More)
Free 7-day Trial
FEEDBACK