CarMax 2Q earnings plunge on weak vehicle sales
Tuesday, 23 September 2008
RICHMOND, Va, Sept 22 (AP): Auto retailer CarMax Inc. said Monday its second-quarter earnings plunged 78 per cent as a weak economy and high gasoline prices eroded its sales.
The Richmond, Va.-based company said earnings for the quarter ended Aug. 31 fell to $14 million, or 6 cents per share, from $65 million, or 29 cents per share in the same quarter last year.
Total sales fell 13 per cent to $1.84 billion from $2.12 billion a year ago. CarMax said same-store sales, or sales at stores open at least a year, tumbled 17 per cent during the quarter.
The results fell short of Wall Street estimates. Analysts polled by Thomson Reuters were predicting earnings of 8 cents per share on sales of $1.93 billion.
"The slowdown in the economy and reductions in consumer spending power resulting from higher gasoline and food costs continued to create a difficult environment for our business," Chief Executive Tom Folliard said in a statement.
The company said the average selling price of its used vehicles declined 6 per cent due to industrywide decreases in used car prices. Wholesale unit sales declined 9 per cent. New vehicle sales fell to $77.8 million from $104.8 million.
As gas prices have climbed, people have been abandoning once-popular trucks and sport utility vehicles in favor of fuel-efficient small cars. That has driven used truck and SUV values lower.
Folliard said external conditions were the primary reasons for the reduction in earnings and said CarMax is taking the necessary and appropriate steps to navigate through the difficult environment.
The company has reduced its used vehicle inventory by more than 13,300 units during the quarter compared with levels of stores open as of May 31, helping to increase its gross profit per unit compared with the first quarter. CarMax also said it continues to align overhead costs with current sales levels and are looking for other opportunities to shrink costs.
The company also continued the suspension its earnings guidance for all of fiscal 2009.
"As a result of the unprecedented near-term declines in traffic and sales and the current volatility in the asset-backed credit markets, we are not yet able to make a meaningful projection of fiscal 2009 earnings," Folliard said.
CarMax also said it saw a 51 per cent decline in its third-party finance fees, partially affected by a tightening in credit availability from some nonprime finance providers and a decline in credit profiles of its average customer.
CarMax Auto Finance reported a pretax loss of $7.1 million compared with income of $33.4 million in the same period last year. Results were reduced by $28.2 million for adjustments related to loans that orginated in prior fiscal years.
The Richmond, Va.-based company said earnings for the quarter ended Aug. 31 fell to $14 million, or 6 cents per share, from $65 million, or 29 cents per share in the same quarter last year.
Total sales fell 13 per cent to $1.84 billion from $2.12 billion a year ago. CarMax said same-store sales, or sales at stores open at least a year, tumbled 17 per cent during the quarter.
The results fell short of Wall Street estimates. Analysts polled by Thomson Reuters were predicting earnings of 8 cents per share on sales of $1.93 billion.
"The slowdown in the economy and reductions in consumer spending power resulting from higher gasoline and food costs continued to create a difficult environment for our business," Chief Executive Tom Folliard said in a statement.
The company said the average selling price of its used vehicles declined 6 per cent due to industrywide decreases in used car prices. Wholesale unit sales declined 9 per cent. New vehicle sales fell to $77.8 million from $104.8 million.
As gas prices have climbed, people have been abandoning once-popular trucks and sport utility vehicles in favor of fuel-efficient small cars. That has driven used truck and SUV values lower.
Folliard said external conditions were the primary reasons for the reduction in earnings and said CarMax is taking the necessary and appropriate steps to navigate through the difficult environment.
The company has reduced its used vehicle inventory by more than 13,300 units during the quarter compared with levels of stores open as of May 31, helping to increase its gross profit per unit compared with the first quarter. CarMax also said it continues to align overhead costs with current sales levels and are looking for other opportunities to shrink costs.
The company also continued the suspension its earnings guidance for all of fiscal 2009.
"As a result of the unprecedented near-term declines in traffic and sales and the current volatility in the asset-backed credit markets, we are not yet able to make a meaningful projection of fiscal 2009 earnings," Folliard said.
CarMax also said it saw a 51 per cent decline in its third-party finance fees, partially affected by a tightening in credit availability from some nonprime finance providers and a decline in credit profiles of its average customer.
CarMax Auto Finance reported a pretax loss of $7.1 million compared with income of $33.4 million in the same period last year. Results were reduced by $28.2 million for adjustments related to loans that orginated in prior fiscal years.