- The Washington Times - Thursday, August 7, 2008

RICHMOND | Used vehicle retailer CarMax Inc. said Wednesday it is reducing staffing levels and will temporarily slow its store growth after seeing a sharp drop in car and truck sales because of high gas prices.

CarMax withdrew its fiscal-year sales and earnings guidance in June, after sales dropped beginning Memorial Day weekend.

Same-store sales continued to fall in June and July, resulting in an average drop of 17 percent for the two months, the company said Wednesday.

As a result, CarMax said it reduced its used vehicle inventory by about 9,500 during those two months and adjusted the vehicle mix to reflect changes in consumer preferences.

As gas prices have climbed, people have been abandoning once-popular trucks and sport utility vehicles in favor of fuel-efficient small cars. That has driven used truck and SUV values lower.

“Falling vehicle prices and the negative equity it is creating continues to pressure sales trends,” RBC Capital Markets analyst Scot Ciccarelli wrote in a note to investors. “Unfortunately for [CarMax], we don’t see any reason for a quick turnaround in those trends.”

The company, which has more than 16,000 employees, said it has worked to lower its store staffing levels, mainly through scheduling and attrition. It also is re-evaluating all open positions and is continuing to focus on controlling overhead expenses.

Layoffs “obviously are our last choice,” said spokeswoman Elia Imler.

The company said it expects to open one additional store in the fiscal year that began March 1, bringing it to 10 openings in the current fiscal year. Four planned store openings will be pushed back to the following year, when the company plans to open between five and 10 stores. The company operates 98 stores.

“While this is clearly a difficult environment for us, we remain confident in our superior consumer offer and our long-term growth opportunity,” Chief Executive Officer Tom Folliard said.

CarMax shares fell 63 cents, or 4 percent, to close at $14.87 after dropping nearly 15 percent earlier Wednesday.

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