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With earnings up, CarMax has plans to expand
Fueled by a surge in demand for used cars, Richmond-based CarMax reported strong second-quarter earnings and plans for significant expansion in the coming months.
The largest used-car retailer in the country reported net earnings grew 26 percent to $140.3 million in its second-quarter results released Tuesday.
Several factors led to the improvements, but the driving forces were double-digit growth in used and wholesale unit sales and CarMax Auto Finance income, said Tom Folliard, CarMax president and chief executive officer.
“We are very pleased with our continued strong sales and earnings growth,” he said.
CarMax stock rose 3.56 percent Tuesday to $51.79 a share.
Used unit sales rose 21 percent, wholesale unit sales rose 10 percent and CarMax Auto Finance income increased 12 percent to $84.4 million. Net sales and reporting revenues increased 18 percent to $3.25 billion, and total unit sales rose 21 percent.
CarMax also announced that it will hire approximately 1,000 employees in the coming months. Detailers and experienced technicians are the target for these new jobs, along with some business office positions available.
The company is in the first year of its three-year growth plan that it hopes will create 10 to 15 new stores each year. Mr. Folliard said that roughly 50 percent of the new stores will be built back into existing markets, but expansion is also important to the company.
“We’re only in 50 percent of U.S. markets,” he said. “We’re thinking about our long-term growth plan and how to make the CarMax consumer offer available to customers all over the country.”
During this second quarter of fiscal 2014, CarMax has opened two stores: one in Katy, Texas, which is its fifth store in the Houston market, and one in Fairfield, Calif., its third store in the Sacramento market.
Sales of used cars climbed more than 20 percent, but the company’s average selling price fell slightly to $19,428. Used cars sales at locations open at least a year rose 16 percent, helped by a modest rise in traffic and better consumer credit conditions. This figure excludes results from dealerships recently opened or closed, giving a picture of growth at continuing locations.
Wholesale sales rose nearly 9 percent on an increase in the appraisal buy rate and more stores being open. New car sales, which make up a smaller part of CarMax’s business, fell 2 percent. Other sales and revenue, which includes fees it receives from third-party lenders its customers use, increased 5 percent.
Gross profit, which is the profit after reconditioning and other costs, climbed 18 percent $434.7 million. Gross profit per used vehicle sold rose $2 to $2,174, and wholesale gross profit per vehicle fell 6 percent to $849.
• This article is based in part on wire service reports.
© Copyright 2014 The Washington Times, LLC. Click here for reprint permission.
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