How CarMax’s Q4 earnings were impacted by COVID, calendar and weather


Severe weather, the coronavirus pandemic, lower sellable inventory than a year ago and calendar shifts all had an impact on CarMax’s fiscal fourth quarter, as the nation’s largest used-vehicle retailer reported higher sales and lower profits.

CarMax’s net sales and operating revenue grew 4.1 percent to $5.16 billion in the period ended Feb. 28, while net earnings fell 2.3 percent to $209.9 million.

The company separately on Thursday announced the acquisition of Edmunds for $404 million. CarMax had bought a minority stake in the automotive-listings and research company for $50 million last year. The full acquisition, expected to be completed in June, will help CarMax with its omnichannel retail efforts while giving Edmunds CarMax’s national scale and infrastructure.

In an earnings call Thursday, CarMax CEO Bill Nash said a key piece of the partnership has led to both CarMax and Edmunds offering an instant-offer tool on their websites. Nash said CarMax is already the largest buyer of vehicles in the U.S., and this will further solidify its position as it also looks to buy more consumer cars and trucks, which are typically more profitable.

Meanwhile, CarMax’s total used-vehicle sales dipped 0.9 percent in the quarter, while on a same-store basis they fell 2.3 percent. CarMax said those sales figures were up in the quarter when excluding the impact of calendar shifts: In this instance the year-earlier period included a leap day.

Retail sales in the first part of the quarter were constrained by a surge in COVID-19 cases, which in some areas of the U.S. caused occupancy restrictions and shelter-in-place orders. Sales then gathered momentum toward the end of December and into January. The strong sales carried into February until severe winter weather across a large part of the U.S. negatively impacted retail sales. Nash said on the earnings call Thursday that the severe weather led CarMax to close more than 65 stores in one day. Lower sellable inventory weighed on the company in the period, too.

The company’s sales in March were strong, driven by tax-refund and stimulus checks.

For its full fiscal year, net revenue fell 6.7 percent to $18.95 billion. Used-vehicle sales for the fiscal year dropped 9.7 percent to 751,862. Used-vehicle sales were down 12 percent on a same-store basis.

CarMax’s net earnings for the year declined 16 percent to $746.9 million.

Shares of CarMax were trading down 6.2 percent to $124.43 Thursday afternoon.

CarMax ranked No. 1 on Automotive News‘ list of the top 100 used-vehicle retailers in 2019, with used-vehicle retail sales of 748,961.

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