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CarMax Earnings Surge as Financing Operations Rebound

June 23, 2010
2 min to read


CarMax Inc.'s profit nearly quadrupled on an improvement at its financing operations as used-vehicle sales climbed, The Wall Street Journal reported.


Shares jumped 9.8 percent premarket to $21.95 as results easily beat analysts' expectations. As of Tuesday's close, the stock had risen 45 percent in the past year.

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The 9 percent same-store-sales increase "reflected the benefit of a continuing gradual rebound in customer traffic, as well as the easy year-over-year comparison," the company said.


Vehicle sellers had a horrific start to 2009 in the wake of the financial crisis, with industrywide sales at levels last seen in the 1970s. CarMax's business is used cars, which proved to be more recession-resistant as consumers opted to buy the less expensive used cars rather than new ones.


For the quarter ended May 31, CarMax reported earnings of $101.1 million, or 44 cents a share, up from $28.7 million, or 13 cents, a year earlier. The most-recent quarter included a 3-cent benefit because of the finance arm's loan-loss position, while the year-earlier quarter included a net reduction of 9 cents because of increased funding costs and other finance arm-related adjustments that were partially offset by a litigation settlement.


Revenue jumped 23 percent to $2.26 billion.


Analysts polled by Thomson Reuters had most recently forecast earnings of 33 cents on $2.09 billion in revenue.

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Gross margin fell to 14.7 percent from 15.1 percent even as the average selling price on a used vehicle rose 8.9 percent to $17,964.


The company's auto-finance business swung to a profit of $57.5 million from a year-earlier loss of $21.6 million.

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