CarMax shares fall after CEO flags high costs, operational shortcomings

By Nathan Gomes

June 17 (Reuters) – CarMax shares fell more than 7.5% on Wednesday as CEO Keith Barr flagged elevated costs and operational shortcomings, after the used-car retailer posted a dip in first-quarter profit amid squeezed margins.

Used-car companies have struggled to maintain margins as affordability concerns weigh on retail demand in an uncertain economy, even as the increase in new-vehicle prices driven by higher U.S. tariffs is expected to steer more buyers toward pre-owned cars.

“Retail prices and selection must continue to improve, and our costs remain too high,” Barr said on a post-earnings call.

The used-car retailer’s core operations were not fast or efficient enough, while its online-to-store buying experience and retail vehicle inventory needed to improve, he added. 

Higher average used-vehicle prices and stronger wholesale demand helped the Richmond, Virginia-based company’s first-quarter revenue increase 6.2% to $8.01 billion, from $7.5 billion a year earlier.

Its quarterly profit, however, fell year-on-year to $185.6 million, or $1.31 per share, from $210.4 million, or $1.38 per share.

CarMax’s retail gross profit per used vehicle shrank to $2,177 during the quarter from $2,407 a year earlier, while its wholesale gross profit per unit was $1,046, down from $1,047.

The company plans to continue trimming costs and improve its logistics network to help expand margins, Barr said. 

(Reporting by Nathan Gomes in Bengaluru; Editing by Jonathan Ananda)