CarMax, Announce today reported results for the fourth quarter and fiscal year ended February 28, 2025.
Fourth Quarter Highlights:
- Net revenues of $6.0 billion, up 6.7%.
- Retail used unit sales increased 6.2% and Announce comparable store used unit sales increased 5.1%; wholesale units increased 3.1%.
- CarMax’s share of the nationwide age 0-10 year old used vehicle market remained at 3.7% in calendar year 2024. Accelerating gains in the back half of the year, reflecting the positive momentum across the business, offset losses in the first half of the year.
- Total gross profit of $667.9 million increased 13.9%, driven by unit volumes and strong unit margin performance.
- Gross profit per retail used unit of $2,322, up $71 per unit and achieving a fourth quarter record
- Gross profit per wholesale unit of $1,045, historically strong, down $75 per unit
- Extended Protection Plans (EPP) margin per retail unit of $580, an increase of $10 per unit
- Service margin loss of $4 per retail unit, an improvement of $257 per retail unit
- Bought 269,000 vehicles from consumers and dealers, an increase of 15.3%.
- 223,000 vehicles were purchased from consumers, up 5.3%
- 46,000 vehicles were purchased through dealers, up 114.2%
- SG&A of $610.5 million increased 5.1%. Ongoing cost management efforts supported strong leverage of 770 basis points in SG&A as a percent of gross profit.
- CarMax Auto Finance (CAF) income of $159.3 million, an increase of 8.2%, due to growth in net interest margin percentage.
- Net earnings per diluted share of $0.58 increased 81.3% from $0.32 a year ago; this year’s quarter was impacted by $0.06 due to a $12 million Edmunds non-cash lease impairment within other expense.
- Repurchased $98.5 million in shares of common stock in the fourth quarter of fiscal year 2025.
| (1) | Comparisons to the prior year’s fourth quarter unless otherwise stated |
CEO Commentary:
“We are pleased with the continuing momentum across our diversified business during the fourth quarter. We delivered robust EPS growth driven Announce by increases in unit sales and buys, strong growth in total gross profit, an increase in CAF income, and ongoing management of SG&A,” said Bill Nash, president and chief executive officer. “
During fiscal year 2025, we further differentiated our consumer offering and drove incremental operational efficiencies. Our associates, stores, technology and digital capabilities, all seamlessly tied together, enable us to provide the most customer Announce centric car buying and selling experience. This is a key differentiator that gives us the right to win and access to the largest total addressable market in the used car space, providing a strong runway for future growth.”
Fourth Quarter Business Performance Review:
Sales. Combined retail and wholesale used vehicle unit sales were 301,811, an increase of 4.9% from the prior year’s fourth quarter.
Total retail used vehicle unit sales increased 6.2% to 182,655 compared to the prior year’s fourth quarter. Comparable store used unit sales increased 5.1% from the prior year’s fourth quarter. Total retail used vehicle revenues increased 7.5% compared Announce with the prior year’s fourth quarter, primarily driven by the increase in retail used units sold.
Total wholesale vehicle unit sales increased 3.1% to 119,156 versus the prior year’s fourth quarter. Total wholesale revenues increased 3.5% compared with the prior year’s fourth quarter, primarily driven by the increase in wholesale units sold.
We bought 269,000 vehicles from consumers and dealers, up 15.3% compared to last year’s fourth quarter. Of these vehicles, 223,000 were bought from Announce consumers and 46,000 were bought through dealers, an increase of 5.3% and 114.2%, respectively, from last year’s fourth quarter.
Other sales and revenues increased by 2.7%, or $4.2 million, compared with the fourth quarter of fiscal 2024, primarily reflecting an increase in EPP revenues resulting from stronger margins.
Online retail sales(2) accounted for 15% of retail unit sales, compared to 14% in the fourth quarter of last year. Revenue from online transactions(3), including retail and wholesale unit sales, was $1.8 billion, or approximately 29% of net revenues, slightly down from 30% in last year’s fourth quarter.
Gross Profit. Total gross profit was $667.9 million, up 13.9% versus last year’s fourth quarter. Retail used vehicle gross profit increased 9.5% and retail gross profit per used unit increased $71 from the prior year’s fourth quarter to $2,322.
Wholesale vehicle gross profit decreased 3.8% versus the prior year’s fourth quarter. Gross profit per unit was historically strong at $1,045, though a decrease of $75 from the prior year’s fourth quarter.
Other gross profit increased 71.8% primarily reflecting growth in service gross profit driven by cost coverage measures, positive retail unit growth, Announce and increased efficiencies as well as growth in EPP revenues supported by stronger margins.
SG&A. Compared with the fourth quarter of fiscal 2024, SG&A expenses increased 5.1% or $29.6 million to $610.5 million, primarily driven by an increase in compensation and benefits due to year-over-year corporate bonus accrual dynamics, with the majority of the balance driven by costs related to unit volume growth.
The change in SG&A was also due to an increase in advertising spend due to timing. SG&A as a percent of gross profit decreased 770 basis points to 91.4% in the fourth quarter compared to 99.1% in the prior year’s fourth quarter, driven by the growth in gross profit and ongoing cost management efforts in the stores and customer experience centers. In fiscal year 2026, we expect to require low-single-digit gross profit growth to lever SG&A.
CarMax Auto Finance.(4) CAF income increased 8.2% to $159.3 million driven by growth in CAF’s net interest margin percentage. This quarter’s provision for loan losses was $68.3 million compared to $71.6 million in the prior year’s fourth quarter.
As of February 28, 2025, the allowance for loan losses of $458.7 million was 2.61% of ending managed receivables, down from 2.70% as of November 30, 2024. The decrease in the allowance percentage reflected the effect of the previously disclosed tightening of CAF’s underwriting standards.
CAF’s total interest margin percentage, which represents the spread between interest and fees charged to consumers and our funding costs, was 6.2% of average managed receivables, up from the prior year’s fourth quarter but consistent with this year’s third quarter. After the effect of 3-day payoffs, CAF financed 42.3% of units sold in the current quarter, in line with the prior year’s fourth quarter. CAF’s weighted average contract rate was 11.1% in the quarter, down from 11.5% in the fourth quarter last year.
Share Repurchase Activity. During the fourth quarter of fiscal year 2025, we repurchased 1.2 million shares of common stock for $98.5 million. As of February 28, 2025, we had $1.94 billion remaining available for repurchase under the outstanding authorization.
Location Openings. During the fourth quarter of fiscal 2025, we opened two new store locations in Mays Landing, New Jersey and Visalia, California, our 250th store. We also opened a stand-alone auction facility in Chino, California that will support the Los Angeles metro market.
Fiscal 2026 Capital Spending Plan. For fiscal 2026, we are planning new store growth of six locations, as well as four stand-alone reconditioning/auction centers. We expect capital expenditures of approximately $575 million in fiscal 2026. The year-over-year increase is primarily driven by the timing of land purchases that were pushed from fiscal year 2025 to fiscal 2026. We continue to build out facilities to support our future long-term growth in offsite reconditioning and auction facilities, as well as our new stores.
Earnings Per Share Growth Model Update. Looking ahead, we have positioned the company to achieve ongoing growth in retail and wholesale unit sales and market share, with double-digit earnings per share growth for years to come. We are excited about the power of the earnings model we have built. Our model is designed to deliver an earnings per share growth CAGR in the high-teens when retail unit growth is in the mid-single digits.
Long-Term Goals. We are focused on growing the business, and we continue to make progress toward our long-term goals. However, we are removing the timeframes associated with them given the potential impact of broader macro factors.
