CarMax (KMX 85.84, +2.84, +3.4%) is up after beating Q1 EPS and revenue expectations. The higher start puts the stock at a fresh record high.
With today's report, the used car dealer has exceeded consensus EPS expectations for six consecutive quarters even though the market has been fretting about slowing vehicle sales and the impact this slowdown will have on vehicle prices.
The company reported above-consensus Q1 EPS of $1.59 on a 12.0% yr/yr increase in revenue to $5.37 bln, which was also ahead of expectations. Comparable store used unit sales increased 9.5% yr/yr, indicating healthy conversion of in-store traffic and an increase in web traffic. The company believes that a "robust lending environment" contributed to the growth in sales in Q1.
Total used vehicle sales grew 13.0% yr/yr to 224,268 while wholesale sales grew 6.6% yr/yr to 120,768. The company found little room to increase prices despite the healthy growth in unit sales. The average selling price of used vehicles ticked down 0.1% to $20,050 while the average price of wholesale vehicles edged up 0.2% to $5,213.
There was no significant change in the company's gross margin, which remained at 13.8%. Used vehicle gross margin remained at 10.9% while wholesale vehicle gross margin improved to 19.0% from 18.6%, and other gross margin grew to 73.3% from 69.7% one year ago.
The company saw an 11.8% yr/yr increase in selling, general, and administrative expenses, but expenses on a per-unit basis decreased 1.2% to $2,183 thanks to the growth in unit sales.
Auto finance income ticked up 0.4% yr/yr to $116.00 mln. The allowance for loan losses increased 9.5% yr/yr to $147.00 mln.
CarMax plans to open 14 stores during the next 12 months. Five of the planned stores will be in small markets.
CarMax exceeded Q1 expectations thanks to a strong increase in unit sales and improved execution. However, the company was not able to increase prices, which is a reminder that operating conditions are less than perfect.