This story has been corrected to remove the reference to AutoNation
It has not come as a surprise that interest rates have been inching up slowly and gas prices have shot through the roof. What was surprising today was CarMax
CarMax's announcement that comparable stores sales are expected to decline 2-4%, from the previous estimate of 1-3% growth, effectively slammed the brakes on a positive quarter and even shifted the company into reverse. The nation's leading specialty retailer of used cars also lowered its guidance on first-quarter earnings from a range of $0.33 to $0.35 per share, to $0.30 to $0.32 per share.
The company also made a sobering revelation that it believes the softness appears to be market-wide, not just company-specific. The fact that CarMax continues to gain market share most probably backs up its industry decline claim.
Will CarMax's chilly outlook have a negative impact and trickle down to companies such as UnitedAuto Group
The answer isn't simple, but car sales have historically been negatively affected by rising interest rates and climbing gas prices. Consumers are likely to turn to cars that get tremendous gas mileage and look for hybrid cars like the "Hollywood It Car" Toyota Prius.
It's often disturbing when companies try to avoid looking in the mirror and instead deflect some of their shortfalls on other companies. I see CarMax's downbeat announcement as both a company flaw and an impending industry issue. It's time to roll down the windows and look around the industry for tire leaks.
Are you a car nut? Take it on over to our Buying and Maintaining a Car discussion board.
Fool contributor Phil Wohl spent over 12 years on Wall Street and now concentrates his writing on more fictional characters. He has no stake in any firm mentioned above.
