CarMax on Tuesday reported a rise in second-quarter profit and revenue, as the used-car retailer leaned on its pricing strategy to drive a rebound in sales, sending its shares up nearly 10 per cent.
Higher interest rates and a tighter availability of cheap vehicles in an already inflationary environment have been prompting consumers to hold on to their older cars for longer.
Additionally, a shortage of cheaper vehicles in the US$10,000 to US$15,000 price range has made it difficult for retailers to attract entry-level buyers.
Used vehicles priced below US$15,000 had only 29 days’ supply, 15 days below the industry average, according to data from Cox Automotive.
However, CarMax has managed to offset those pressures by using pricing actions to chase volume over profit per vehicle.
CarMax saw its higher-income customer base widen during the second quarter, prompting the retailer to shift its inventory toward newer, lower-mileage vehicles, CEO Keith Barr told Reuters.
The company reported a modest shift toward hybrids and electric vehicles, but gas-powered vehicles still accounted for the vast majority of sales, he said.
Its retail gross profit per used vehicle fell to US$2,105 in the second quarter from US$2,216 a year earlier, while retail used-vehicle sales rose 13.8 per cent to 227,391 vehicles.
CarMax’s overall net revenue rose about 20 per cent to US$7.9 billion in the three months ended August 31 from a year ago.
Its quarterly profit rose to US$165.3 million, or US$1.16 per share, compared with US$95.4 million, or US$0.64 per diluted share, from a year earlier.
---
Reporting by Nathan Gomes in Bengaluru; Editing by Shreya Biswas
