Auto retailer CarMax Inc. is focused on eliminating waste and improving execution to weather the weak automotive market and better position it for future growth, Chief Executive Tom Folliard told shareholders at its annual meeting Tuesday.
The Richmond, Va.-based company, which operates 100 stores, has lowered its expenses in the past six months by about $45 million compared with the previous year, helping offset declines in traffic and sales, Folliard said.
"We don't want to sit back and wait for the economy to come back. We want to use this as an opportunity to improve," Folliard told shareholders. "We can take about any punch that the external environment throws at us and we're going to end up on top."
Reconditioning used cars was one of the main areas where CarMax was able to cut costs, yielding savings of about $100 per vehicle and improving profit margin, which rose 13.5 percent in its fiscal first-quarter that was reported Friday. Folliard said the company expects to sell more than 300,000 cars this year, resulting in savings of about $30 million from those previous costs.
CarMax saw its sales tumble last year as a result of the industrywide plunge in consumer demand for vehicles. In addition, increasingly tight credit markets made it tough for many consumers who did want to buy vehicles to get the financing they needed. CarMax's financing arm allowed the company to minimize that impact.
For the full year, the company posted profit of $59.2 million, or 27 cents per share, down 67.5 percent from $182 million, or 83 cents per share, in fiscal 2008. Sales fell 15 percent to $6.97 billion from $8.2 billion the previous year.
Shares of CarMax dropped about 50 percent during its fiscal year ended Feb. 28 to close the year at $9.43.
But the company's executives were encouraged by its first-quarter results; when total sales fell 17 percent compared with the year-earlier period, versus a decrease of 28 percent during the fourth quarter.
CarMax said its fiscal first-quarter profit fell 2.7 percent on the sales drop and increased costs at its auto financing arm, but the results still beat Wall Street expectations.
"It's hard to get excited about negative 17 percent, but I'm pretty excited about it," Folliard said, later adding that its improvements in the quarter were a combination of cost-cutting and a better marketplace.
At the meeting on Tuesday, shareholders also re-elected four board members and approved changes to the company's stock incentive and employee share purchase plans.
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