'Affordability' challenges from higher loan rates and rising used-car
prices led to a sharp drop in unit sales, starting in July and through
August. CarMax Inc. investors were enduring the worst day in more
than 20 years on Thursday, after the used-car retailer missed earnings
expectations by a wide margin, citing "affordability" challenges
stemming from inflation and low consumer confidence. The stock
(KMX) tumbled 23.9% in midday trading, on track for the biggest one-day
percentage decline since its record 28.1% plunge on Jan. 20, 2000. It
was by far the worst performer in the S&P 500 index on Thursday, and
was headed for the lowest close since April 2020. "Macro factors,
including vehicle affordability that stem from persistent and broad inflation,
climbing interest rates and low consumer confidence all led to a marketwide
decline in used auto sales," said Chief Executive Bill Nash on a post-earnings
conference call with analysts, according to a FactSet transcript. Net income
for the quarter to Aug. 31 fell to $125.9 million, or 79 cents a share, from
$285.3 million, or $1.72 a share, in the same period a year ago. That was
well below the FactSet consensus for earnings per share of $1.39.
Revenue increased 2% to $8.14 billion, below the FactSet consensus of
$8.54 billion. Meanwhile, cost of revenue increased more than revenue,
rising 3.3% to $7.41 billion to knock gross margin down to 9.05% from 10.21%.