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CarMax Reduces Second Quarter Expectations

August 19, 2004

CarMax, Inc. is reducing sales and earnings expectations for the second quarter ending August 31, based on softer than expected sales. CarMax has lowered second quarter comparable store used unit performance expectations to a range of -5 percent to -7 percent from the prior range of -5 percent to 1 percent. CarMax has revised second quarter earnings expectations to a range of 27 cents to 30 cents per share from the prior range of 30 cents to 35 cents. "Both sales and earnings were tracking at the lower end of our expected range through July as the volatility we experienced in the first quarter continued," said Austin Ligon, president and chief executive officer. "However, sales in the beginning of August have been substantially slower than anticipated.” According to CarMax, the slow start is due to Tropical Storm Bonnie and Hurricane Charley, which caused significant disruption to its stores from Florida through the mid-Atlantic from Thursday through Saturday of the past week. "As a result, we now believe it is likely we will report comp store used unit sales and earnings for the second quarter that are slightly below the low end of our original expectations," said Ligon. "We currently don't believe that we will recover enough of our sales shortfall in the second half of the month to meet the second quarter sales and earnings guidance we issued on June 17." CarMax had expected second quarter comparable store used unit sales performance in the range of -5 percent to 1 percent and earnings per share in the range of 30 cents to 35 cents. CarMax now expects second quarter comparable store used unit sales performance in the range of -5 percent to -7 percent and earnings per share in the range of 27 cents to 30 cents. "Even absent the storm effects, evidence continues to be strong that the sales softness is industry-wide," said Ligon. "For the second calendar quarter, the publicly owned franchised dealers all reported soft used-vehicle sales trends, with used-car unit comps declining by an average of more than 9 percent, which was substantially lower than our results for the same period. Consequently, we continue to believe the CarMax concept provides significant advantages even in a difficult used car sales environment."
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