CarMax, Inc. (NYSE: KMX) reported a strong performance for the third quarter of fiscal year 2025, showcasing significant growth across multiple segments of its business. The company achieved a notable 55.8% increase in net earnings per diluted share, reaching $0.81 compared to $0.52 in the same period last year.
An overall increase in unit sales and strong margin performance drove this growth. Retail used unit sales rose by 5.4%, while comparable store used unit sales increased by 4.3%. Additionally, wholesale units experienced a 6.3% growth. The total gross profit climbed to $677.6 million, marking a 10.6% rise from the previous year’s third quarter, attributed to increased unit volumes and solid unit margin performance.
CarMax’s financial services arm, CarMax Auto Finance (CAF), also contributed to the positive results. CAF’s income grew by 7.6% to $159.9 million, supported by an increase in the net interest margin percentage and average managed receivables. The provision for loan losses was in line with expectations. Furthermore, the company repurchased $114.8 million in shares of common stock, enhancing shareholder value. The third quarter also saw CarMax buying 270,000 vehicles from consumers and dealers, a 7.9% increase from the previous year.
CarMax Beats Market Expectations in Q3 with $0.81 EPS
The company’s performance for the quarter surpassed market expectations. Analysts had anticipated an earnings per share (EPS) of $0.60, but CarMax delivered an EPS of $0.81, significantly exceeding these projections. Revenue expectations were set at $6.04 billion, yet CarMax reported net sales and operating revenues of $6.223 billion, reflecting a 1.2% increase compared to the prior year’s third quarter. This performance was underpinned by a combination of strategic initiatives and favorable market conditions.
The increase in retail used vehicle sales and wholesale unit sales contributed to this outperformance. Despite a decrease in average retail selling prices by approximately $1,100 per unit, the volume growth managed to offset the impact, leading to an overall increase in revenue.
Wholesale vehicle revenues also saw a slight increase of 0.3%, driven by higher unit sales. The company’s ability to manage costs effectively was evident in the 2.8% rise in SG&A expenses, which was lower than the growth in gross profit.
CarMax Optimistic on Growth Prospects
CarMax remains optimistic about its growth prospects, leveraging its diversified business model and omni-channel experiences. The company plans to release its fourth-quarter results for fiscal 2025 on April 10, 2025. The focus will be on maintaining momentum in unit sales and margin performance, while continuing to manage costs efficiently. CarMax’s strategy includes expanding its market presence and enhancing its digital capabilities to cater to evolving consumer preferences.
The company’s leadership expressed confidence in its ability to navigate market challenges and capitalize on opportunities within the industry. With a stable environment for vehicle valuations and a strong operational framework, CarMax is well-positioned to achieve its financial targets.
Disclaimer: The author does not hold or have a position in any securities discussed in the article.
About the author
Tim Fries is the cofounder of The Tokenist. He has a B. Sc. in Mechanical Engineering from the University of Michigan, and an MBA from the University of Chicago Booth School of Business. Tim served as a Senior Associate on the investment team at RW Baird’s US Private Equity division, and is also the co-founder of Protective Technologies Capital, an investment firm specializing in sensing, protection and control solutions.
