CarMax Reverses a Sales Slide and Restarts Buybacks
Net earnings reached $1.16 a share, up 81.3% from $0.64 a year earlier, as combined units reached 387,735.
CarMax, Inc. (KMX), the nation’s largest retailer of used autos, reversed a year-over-year sales slide in the quarter ended August 31, 2026, as combined retail and wholesale unit sales rose 14.7% to 387,735 after a 3.3% increase in the prior quarter.
Total net revenues rose 19.5% to $7.9 billion, after a 6.2% rise in the first quarter. Retail used unit sales increased 13.8% to 227,391, and comparable store used unit sales increased 13.0%, after retail used units increased slightly and comparable store used unit sales declined 0.8% in the first quarter.
Retail used vehicle revenues increased 19.7%, driven by higher units and an increase in average retail selling price of approximately $1,600 per unit, or 6.3%. Wholesale units increased 15.9% to 160,344. Wholesale revenues increased 18.2% on higher units and a $145, or 1.8%, rise in average wholesale selling price.
Gross profit per retail used unit was $2,105, down $111 from a year earlier, after a $230 decline to $2,177 in the first quarter. The drop reflected the continuation of pricing actions implemented to support an improved sales trend. Retail used vehicle gross profit increased 8.1% to $478.6 million. Total gross profit was $799.5 million, up 11.4%. Gross profit margin was 10.1% of net sales.
Wholesale vehicle margin of $137.6 million was flat to a year ago, with higher volume offset by lower gross profit per unit of $858, down $135. Other gross profit was $183.3 million, up 33.1%, as EPP margin dollars rose $26.5 million on both unit volume and unit margins, up $46 per unit to $623, and service margin increased by $22.0 million.
SG&A expenses increased 4.6% to $628.6 million, after a 3.7% decrease in the first quarter. SG&A per total unit improved by $157, or 8.8%, to $1,621. Ongoing cost reduction efforts were offset as the company annualized over materially reduced incentive-based compensation and by variable costs tied to strong unit growth, partially offset by savings from actions to reduce field and corporate payroll. It remains on track to achieve targeted SG&A reductions of $200 million in exit rate savings by the end of fiscal 2027.
CarMax Auto Finance income increased 32.1% to $135.6 million, after a 1.0% decrease to $140.2 million in the first quarter. The increase was driven by a $28.8 million decrease in the loan loss provision to $113.4 million, as performance this year has been in line with expectations, partially offset by provisioning related to Tier 2 originations. CAF income also benefited from a $16.6 million gain on sale of auto loans and a $6.1 million increase in servicing fees. CAF financed 22% of Tier 2 volume versus 10% a year ago and was the largest lender in that space. Net penetration was 40.9% after the effect of 3-day payoffs. The weighted average contract rate was 11.8%. Total interest margin was 6.6% of average auto loans outstanding.
Net earnings per diluted share were $1.16 versus $0.64 a year ago, an increase of 81.3%, after $1.31 versus $1.38 a year ago in the first quarter. Net earnings were $165.3 million. Other income was $18.6 million, primarily from unrealized gains on equity investments.
The company intends to resume share repurchases at a modest level in the third quarter of this fiscal year. It did not repurchase shares in the second quarter of fiscal 2027. As of August 31, 2026, it had $1.31 billion remaining under authorization.
President and Chief Executive Officer Keith Barr said the results reflect early progress against Shift into GEAR, the four-pillar strategy introduced last quarter. Digital capabilities supported 81% of retail unit sales; omni sales were 68%, and online retail sales accounted for 13%. The company opened an offsite auction center and store in Conroe, Texas, and a store in Richland, Washington, during the quarter, and an additional store in Austin, Texas, after quarter-end. CarMax will host a virtual Strategic Update on November 3rd.