KMX 2009 Q1 Earnings - by BetterTrades

The nation’s largest used auto retailer, CarMax Inc. (KMX) made it known before the opening bell on June 19 that the company’s profits receded during the 1Q, as sales of big-ticket items continue to waver under the current economic turmoil.

During the most recent quarter, CarMax booked net income of $28.7M, or $0.13 per share, in contrast to the previous year’s 1Q profits of $29.6M, or $0.13 per share, a decrease in earnings of just over 3%.

The quarter also left CarMax with a one-time charge that accounted for a $0.11 per share decrease due to a loss in the company’s financing arm related to outstanding loans. Excluding the charges, CarMax would have posted quarterly earnings of $0.22 per share on an adjusted basis.

As for sales, CarMax witnessed quarterly revenues plunge during the period, falling from $2.21B to $1.83B, a decline in sales of more than 17%. One of the key stats for sales, same store sales, those that have been opened for at least one year, fell 18% during the quarter.

On average, analysts within the industry, were looking for quarterly earnings from CarMax of $0.04 per share on total revenues of $1.72B. "Despite the difficult economic conditions, we are pleased to report some signs of improvement," confirmed Tom Folliard, President and CEO at CarMax.

Looking deeper into the company’s report, used vehicle sales dipped more than 13% during the period with the average selling price on a used car dropping 2.2%, due to the impact of weaker demand imposed by the current economic situation. The only saving grace for CarMax in the used car segment was the fact that gross profit for vehicles sold increased nearly 14%, in response to reduced reconditioning costs.

As for new car sales, revenues generated throughout this segment plummeted more than 42%. The company’s financing arm reported a net loss of $21.6M, in sharp contrast to the previous year’s profit of $9.8M, due to the lack of debt-free customers making purchases. With it costing more for CarMax to sell a car to a less qualified buyer, higher impact costs reduced the company’s bottom-line by more than $40M.

Included in the company’s financing arm, CarMax witnessed overall volume within loans dropping 27% year-over-year, as sales declined and a company-wide decision was made to curtail the amount of in-house lending.

Other sales and services provided by CarMax decreased nearly 4%, falling from $67.5M to $64.9M. These other sales include extended service plans, which fell 5% from last year’s tally. On a positive note, service department sales increased 9% during the quarter, as owners were more inclined to fix their automobiles instead of purchasing newer ones.

Folliard went on to add about the company’s report, "While our customer traffic trend continued to be weak, we did see improvement in the first quarter compared with the fourth quarter of fiscal 2009. On a year-over-year basis, sales execution improved notably, which partially offset the decline in traffic."

Following the company’s quarterly performance report on June 19, shares of KMX broke through resistance, reaching a price not seen in more than eight months. At the conclusion of Friday’s session, shares of CarMax surged nearly 17% from the previous trading session.

Gaining more than $2 a share, the stock reached a high of $15.40, a price not seen since late September 2008. By the sound of the closing bell, KMX shares added $2.22 to end the week at $15.31 per share. Over the course of a year, CarMax stock has traded as high as $17.12 per share, and as low as $5.76 per share.

By BetterTrades