CarMax Reports Second Quarter Sales; Expects Second Quarter EPS of Approximately 27 Cents
CarMax, Inc. total sales for the second quarter ending August 31 rose 7 percent to $1.32 billion from $1.24 billion in the same period last year. Total used-unit sales rose 4 percent for the quarter. Comparable store used-unit sales declined 7 percent for the quarter. The company now expects second quarter earnings of approximately 27 cents per share. "The sales volatility and weakness that we experienced in June and July, and especially in early August, continued through the end of the quarter. August results also suffered from the effects of tropical storms on our Florida and mid-Atlantic stores,” said Austin Ligon, president and chief executive officer. Addition of Subprime Finance Provider during the second quarter, CarMax added a new third-party finance provider focused on Subprime customers, Drive Financial Services. Drive was rolled out to CarMax's entire used-car superstore base during the first half of August, following more than nine months of testing in selected stores. At CarMax, customers who have been turned down by all other in-store finance providers may qualify for Drive financing. Drive offers financing to customers within carefully constructed parameters, including vehicle price, year, make, and mileage; payment-to-income ratios; and minimum down payments. As is customary in the subprime finance industry, Drive purchases the loan contracts at a discount. For the second quarter, used-car sales financed by Drive had a modest effect on overall sales, given the timing of the rollout. "We believe Drive represents an opportunity to provide us incremental sales and some incremental profit," said Ligon. "It is still too early to determine the ultimate incremental sales that may be provided by Drive, given the time required to build consumer awareness of this new financing opportunity." "For the second quarter, we now expect earnings per share of approximately 27 cents," Ligon said. "We plan to offer guidance for our third quarter when we release our second quarter earnings report on September 20." CarMax opened three superstores during the second quarter, entering the Austin, Texas, market with a standard superstore and adding satellite superstores in Winston-Salem, N.C., in the Greensboro market, and in Fayetteville, N.C., in the Raleigh market. The company has opened six superstores thus far in fiscal 2005 and now plans to add three superstores during the second half of the fiscal year. The satellite superstore in Ontario in the Los Angeles market scheduled to open at the end of the fiscal year is now expected to open in early March.