CarMax (KMX) Q1 2025 earnings summary

Executive summary

• Q1 FY25 net sales and operating revenues were $7.11 billion, down 7.5% year-over-year, with net earnings of $152.4 million, a 33.2% decrease from the prior year; net earnings per diluted share were $0.97, down from $1.44 last year, which included a $0.28 per share legal settlement benefit.

• Retail used unit sales declined 3.1% and wholesale unit sales fell 8.3% year-over-year, reflecting affordability challenges and higher interest rates.

• CAF income rose 7% to $147 million, driven by higher managed receivables and a net interest margin of 6.2%.

• SG&A expenses increased 14.1% year-over-year, mainly due to the absence of a prior year legal settlement and higher share-based compensation.

• Online retail sales accounted for 14% of units, with 57% of retail sales omni-channel, up from 54% last year.

Financial highlights

• Gross profit was $791.9 million, down 3.1% year-over-year; retail gross profit per used unit was $2,347, nearly flat year-over-year.

• Wholesale gross profit per unit hit a Q1 record at $1,064.

• Net cash used in operating activities was $117.7 million, an improvement from $185.3 million used in the prior year period.

• Cash and cash equivalents at quarter-end were $218.9 million, with total debt of $18.78 billion.

• SG&A as a percent of gross profit increased to 80.6% from 68.5% (or 75.7% excluding prior year legal settlement).

Outlook and guidance

• Comp sales trends improved through Q1 and into June, with June month-to-date running slightly positive.

• Management expects the expanded securitization program to support incremental finance income and future CAF growth.

• SG&A per unit advertising spend is targeted at ~$200 for the year; active cost management expected to enable leverage on low single-digit gross profit growth.

• Cost of goods sold initiatives in logistics and reconditioning targeted to save $200 per retail unit over the next 1-2 years.

• Capital expenditures for FY2025 are projected at $500 million–$550 million, supporting new stores, reconditioning, and auction facilities.