CarMax Inc. (KMX) - Get Free Report shares powered higher Friday after the used car retailer posted stronger-than-expected first quarter earnings amid what it called a "challenging macro environment".
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CarMax said adjusted earnings for the three months ending in May, the group's fiscal first quarter, fell 7.7% from last year to $1.44 per share, but came in well ahead of the Street consensus forecast of 79 cents per share.
Group revenues, CarMax said, were down 17.4% at $7.7 billion but again topped analysts' estimates of a $7.53 billion tally. Combined wholesale vehicle sales were down 11.3% to 378,972 units, but retail sales formed a larger portion of the overall revenue tally, at 14%, and expenses were down 15% at $560 million.
"Our deliberate actions are driving improved trends in the business, despite the challenging macro environment," said CEO Bill Nash. "Our unit performance in used, wholesale and consumer and dealer buys all improved sequentially from the year-over-year trends in the second half of fiscal year 2023. We also continued to deliver strong retail and wholesale gross profit per unit along with SG&A reductions."
"We are prioritizing projects that drive operating efficiencies and create better experiences for our associates and customers," Nash added. "We believe these steps will enable us to come out of this cycle leaner and more effective, while also positioning us for future growth."
CarMax shares were marked 7.9% higher in pre-market trading to indicate an opening bell price of $84.50 each.
The Commerce Department's May inflation report, published earlier this month, showed used car prices were up 4.4%, matching April's increase, after falling for the previous nine months.
Higher borrowing costs, pegged to the Federal Reserve's year-long run of 10 consecutive rate hikes, have also made new car purchases increasingly expensive for most consumers, adding to demand for pre-owned vehicles.
Earlier this month, smaller rival Carvana (CVNA) - Get Free Report issued a bullish near-term outlook, forecasting second quarter profits of around $50 million, thanks in part to ongoing cost-cuts and firming secondary car market.