Used vehicle retailer CarMax (KMX 6.59%) reported fiscal 2025 third-quarter results on Thursday, Dec. 19, that topped analysts' consensus estimates. Earnings per share (EPS) came in at $0.81, well above the analyst expectations of $0.62. It also exceeded Q3 revenue expectations with a total of $6.22 billion, against the forecasted $6.05 billion.
Overall, despite facing headwinds from declining used vehicle prices, CarMax delivered a solid quarter with remarkable growth in both earnings and profits.
| Metric | Q3 2025 | Analysts' Estimate | Q3 2024 | Change (YOY) |
|---|---|---|---|---|
| EPS | $0.81 | $0.62 | $0.52 | 56% |
| Revenue | $6.22 billion | $6.05 billion | $6.15 billion | 1.2% |
| Total gross profit | $677.6 million | N/A | $612.9 million | 10.6% |
| SG&A expenses | $575.8 million | N/A | $560.0 million | 2.8% |
Source: CarMax. Note: Analyst consensus estimates for the quarter provided by FactSet. YOY = Year over year.
Overview of CarMax's Business
CarMax operates as the largest retailer of used vehicles in the United States. It offers an extensive inventory of used cars that can be purchased online, in-store, or through a mix of both. This omnichannel approach provides flexibility for consumers, reinforcing CarMax’s position as an industry leader in customer service and satisfaction.
Recently, CarMax has focused on enhancing its omnichannel platform, leveraging its no-haggle pricing strategy, which enables transparent and straightforward customer transactions. Key factors for its success include effective vehicle sourcing to maintain a diverse inventory and leveraging its CarMax Auto Finance (CAF) division to provide finance options directly to customers.
Quarter Accomplishments
During the third quarter, CarMax focused on strengthening its retail used unit sales, achieving a growth of 5.4% and a 4.3% increase in comparable store sales compared to the previous year. The enhancement of its omnichannel platform led to an increase in online retail activity, rising from 14% to 15% in this quarter.
The company also advanced in vehicle sourcing, resulting in a 7.9% increase in cars acquired from consumers and dealers, with a significant 46.7% boost in dealer acquisitions. This strategic pivot ensures a steady flow of varied inventory, crucial for both retail and wholesale channels amid fluctuating vehicle prices.
On the finance side, CarMax Auto Finance experienced a 7.6% increase in profit, reaching $159.9 million. This growth was attributed to an improved net interest margin, though challenges emerged with the penetration rate dropping slightly to 43.1% (from 44%) due to competitive market pressures.
CarMax’s technology investments also paid off, with advances in digital tools like artificial intelligence (AI) and data analytics enhancing pricing strategies and inventory management, further solidifying its market position.
Looking Ahead
Despite not providing explicit forward guidance, CarMax management has said elsewhere that it remains optimistic regarding the future. It intends to leverage its strong omnichannel capabilities and CAF’s positive performance to sustain growth. The company plans to focus on transforming its digital retail platform and service offerings to align with consumer preferences in an evolving market.
Going forward, monitoring the impact of declining vehicle prices on margins and addressing industry-wide credit challenges in the CAF segment will be key areas of focus. Investors should look for updates on these fronts, as well as any strategic shifts in vehicle acquisition and inventory management that might arise in the coming quarters.
