Shares of automotive retailers tumbled Wednesday on worries that the continued decline in U.S. vehicle demand will result in steep drops in their sales and profits.
Automakers have significantly scaled back their U.S. production this year in the face of soaring fuel costs, a weak overall economy and a shift in consumer preferences toward smaller, more fuel-efficient vehicles.
CarMax Inc., a used vehicle retailer, said earlier Wednesday that its same-store sales _ or sales at stores open at least a year _ dropped 17 percent in June and July. It blamed high gas prices for driving its customers away.
As a result, CarMax said it reduced its used vehicle inventory by about 9,500 units during those two months and adjusted the vehicle mix to reflect changes in consumer preferences.
The company also said that its working to lower its staffing levels and scaling back plans for store openings this year.
Scot Ciccarelli of RBC Capital markets said that while he knew business wasn't good at CarMax, the drop in same-store sales was much worse than he expected.
"Some long-term longs will continue to hold/buy the stock, but we believe that a long time horizon is necessary to justify this," Ciccarelli wrote in a note to investors. "Further, the reduction in store growth will likely bother a lot of investors that have continued to bank on the company's long term growth and market share gain potential."
In midday trading, CarMax shares dropped 90 cents, or 5.8 percent, to $14.60, after falling to $13.19 earlier. Over the past 52 weeks, the company's shares have traded between $10.53 and $25.55.
Other vehicle retailers also posted substantial declines. Group 1 Automotive Inc. dropped $1.42, or 6.4 percent, to $20.84, while America's Car-Mart Inc. fell $1.16, or 5.8 percent, to $18.95.
Elsewhere in the sector, AutoNation Inc. fell 56 cents, or 4.9 percent, to $10.94, and Penske Automotive Group Inc. dropped 45 cents, or 3.2 percent, to $13.81.
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