Wondrous Stock: CarMax, Inc (NYSE: KMX)

On 15 July 2020, CarMax, Inc (NYSE: KMX) stock soared 4.04% and closed at 95.04. The stock opened the session at $92.58 and touched its highest price point at $95.06. Its recent trading capacity is 1,437,801 shares versus to its average trading volume of 1.87M shares. The company’s stock’s lowest price point for the session stood at $92.18. KMX traded as low as $ 37.59 in the past 52 weeks, and shares hit its peak level to $103.18.

CarMax, Inc. (KMX) recently stated results for the first quarter ended May 31, 2020.

Highlights:

First quarter performance importantly influenced by the Coronavirus pandemic. Over 80% of the days in the quarter were negatively influenced by a mix of store closures and limited operations (1)In addition, open stores were also influenced by occupancy restrictions. For the quarter, comparable store used unit sales declined 42%.

Sales have progressively improved since hitting a trough in early April; comparable store used unit sales for the two weeks ended June 14 were within 10% of last year’s sales, with many stores generating positive comparable stores sales.

Strong margin management execution during a period of unprecedented depreciation; used and wholesale gross profit per unit for the first quarter were $1,937 and $978, respectively.

Grew our liquidity position during the quarter by selling through inventory and quickly aligning costs to lower sales volumes.

Omni-channel rollout almost complete; in addition, consumers can now buy a car via curbside pickup at 200 stores nationwide.

First Quarter Business Performance Review:

Summary Results. Net sales and operating revenues declined 39.8% to $3.23B. Net earnings declined 98.1% to $5.0M and net earnings per diluted share declined 98.1% to $0.03. The current quarter’s results included $122.0M in the CarMax Auto Finance (CAF) provision for loan losses, which included a raise of $84.0M, or $0.38 per diluted share, in our estimate of lifetime losses on existing loans resulting from the Coronavirus-related turmoil and worsening economic factors. Net earnings per diluted share for the current quarter also included a one-time benefit of $0.18 in connection with our receipt of settlement proceeds in a before revealed class action lawsuit.

Liquidity. As of May 31, 2020, we had $658.0M in cash and cash equivalents on hand and $1.08B of unused capacity on our revolving credit facility, contrast with $58.2M and $997.3M, respectively, as of February 29, 2020. Total long-term debt, not including non-recourse notes payable, declined to $1.71B as of May 31, 2020, contrast with $1.79B as of February 29, 2020.

Sales. Total used vehicle unit sales declined 39.8%, including a 41.8% decrease in comparable store used unit sales contrast with the previousyear’s first quarter. The comparable store sales performance reflected the combined effects of Coronavirus-related store closures and restrictions on operations, as well as reduced consumer traffic resulting from the economic impact of the pandemic and nationwide shelter-in-place orders.

Total wholesale vehicle unit sales declined 47.6% contrast with the first quarter of fiscal 2020. While we continued to make offers to all appraisal consumers, the decline in wholesale volume reflected both lower appraisal traffic and a reduction in our appraisal buy rate. The buy rate typically declines during periods of weaker wholesale industry pricing as we adjust our appraisal offers in response to the wholesale pricing environment. Previous to the current quarter, almost all of our auctions were conducted as in-person, physical auctions. During the quarter, we successfully transitioned our wholesale auctions to an online platform, which allowed us to continue selling our wholesale units despite restrictions on our in-person operations.

Other sales and revenues declined 38.9% contrast with the first quarter of fiscal 2020, reflecting decreases in extended protection plan (EPP) net revenues, and new car and service department sales. EPP revenues declined $37.9M, largely reflecting the reduction in our used unit sales. The current quarter’s EPP revenue included a year-over-year benefit of $6.7M related to the receipt of profit-sharing revenue and a favorable change in cancellation reserves. The new car and service department sales declines reflected both store closures and reduced consumer traffic.

KMX has a gross margin of 12.80% and an operating margin of 4.50% while its profit margin remained 3.40% for the last 12 months. Its earnings per share (EPS) expected to touch remained 11.20% for this year while earning per share for the next 5-years is expected to reach at 12.40%.

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