CarMax, a major auto and truck dealership, said wholesale vehicle unit sales for the quarter ending May 31 increased 9.6% year over year, driven by strong growth in the company’s store base and strong appraisal buy rate.
The Richmond, Virginia-based company reported net earnings of $1.33 per diluted share, outperforming analyst expectations by 8 cents.
Company accelerates revenue growth during the quarter
CEO Bill Nash said that even though “macro pricing factors” negatively impacted sales, the comparable unit store sales decline of 2.3% year over year represented a 5.7% improvement from the prior quarter. More-favorable mixed adjusted vehicle acquisition costs during the quarter contributed to the improved comp sales. Additionally, Nash said that the marketplace for used cars are “showing signs of recovery” due to higher supply at auctions and “more normalized depreciation.”
Nash also said wholesale unit sales increased 9.6% year over year as the company’s buy rate reached “a multiyear high” due to increasing prices for used vehicles. According to the CEO, CarMax opened three new stores during the quarter: one each in Dallas, Texas; Miami, Florida; and Greenville, North Carolina.
Stock rises over 13% on the strong revenue growth
CarMax traded around $80.82 at 10:30 a.m., up 13.76% from its previous close of $71.04.
The company has good growth potential even though the company trades near a 10-year high and above its Peter Lynch earnings line. GuruFocus ranks CarMax’s profitability 6 out of 10: while the company’s operating margin outperforms just 57% of global competitors, CarMax’s profit margins have increased approximately 8% per year over the past 10 years.
Several gurus have boosted their positions in CarMax over the past five months, including Ruane Cunniff (Trades, Portfolio), Lou Simpson (Trades, Portfolio) and Wallace Weitz (Trades, Portfolio).
Disclosure: No positions.
