Key Takeaways
- CarMax reported a Q4 net loss totaling $120.7 million, equivalent to 85 cents per share, primarily due to a $141.3 million goodwill impairment.
- Shares declined 6.8% during premarket hours on Tuesday morning.
- On an adjusted basis, earnings per share reached $0.34, surpassing analyst predictions of $0.18; total revenue hit $5.95 billion versus expectations of $5.65 billion.
- Gross profit margins on retail used vehicles decreased to $2,115 per unit from $2,322 year-over-year; wholesale margins fell to $940 from $1,045.
- The company announced plans to launch four new retail locations and four reconditioning/auction centers during fiscal 2027, allocating approximately $400 million in capital expenditures.
CarMax (KMX) stock experienced a 6.8% decline in premarket activity Tuesday following the disclosure of a fourth-quarter net loss and a significant $141.3 million goodwill impairment.
The Virginia-headquartered used vehicle dealer recorded a net loss of $120.7 million, translating to 85 cents per share during the quarter. This stands in stark contrast to the $89.9 million profit, or 58 cents per share, achieved during the corresponding quarter last year.
However, excluding the goodwill impairment, the results tell a more favorable story. CarMax delivered adjusted earnings of 34 cents per share — substantially beating Wall Street’s consensus forecast of 18 cents.
Quarterly revenue reached $5.95 billion, representing a modest 1% decline from the prior year but comfortably exceeding the $5.65 billion projected by analysts.
The goodwill write-down came as little shock to market observers. CarMax explained the charge resulted from a substantial decline in market capitalization, underwhelming financial results throughout fiscal 2026, and adjustments to future growth projections.
Profitability Per Vehicle Continues Decline
Per-unit margins on used vehicles remained under significant pressure. Retail gross profit per vehicle slipped to $2,115 during the quarter, down from $2,322 in the year-ago period. Wholesale gross profit per unit also contracted, falling to $940 compared to $1,045 previously.
The retailer implemented price reductions to accelerate inventory turnover. The strategy yielded some success — wholesale unit volume increased 3% to 122,781 vehicles. However, average wholesale selling prices declined approximately $270 per vehicle, offsetting much of the volume gain.
Retail used vehicle sales edged down 0.8% year-over-year to 181,188 units. Comparable store performance showed a 1.9% decline. Average retail prices dropped roughly $110 per vehicle.
Total combined volume across retail and wholesale channels remained essentially flat, rising just 0.7% to 303,969 units.
Consumer behavior has also presented challenges. Gasoline prices lingering around $4 per gallon have dampened buyer confidence. This dynamic has accelerated interest in electric and hybrid vehicles, reshaping demand in the pre-owned automotive marketplace.
Leadership Transition Brings Fresh Strategy
Newly appointed President and CEO Keith Barr utilized his inaugural earnings call to outline a more aggressive operational approach.
“We are moving with urgency to improve execution, drive efficiencies, and sharpen our customer offering,” Barr stated. He emphasized that competitive pricing and extensive vehicle selection will serve as primary competitive advantages for attracting customers.
Barr further explained that the objective is positioning CarMax as “the obvious choice for customers” by delivering superior pricing, comprehensive inventory options, and an enhanced overall purchasing experience.
Looking toward fiscal 2027, CarMax disclosed expansion plans including four new retail stores and four additional reconditioning and auction facilities. The company anticipates capital spending of approximately $400 million.
Full-year quarterly revenue declined 1% to $5.95 billion.
Adjusted annual EPS contracted to 34 cents from 64 cents in the previous fiscal year, underscoring the challenging margin conditions affecting operations across all business segments.
