KMX 2009 Q4 Earnings - by BetterTrades

As one of the nation's leading auto retailers, CarMax Inc. (KMX) acknowledged early Thursday morning that the company's profits during the 4th quarter jumped substantially for the period, driven by lower overall expenses and a profit from the company's financing arm.

For the quarter, CarMax posted net income of $37.5M, or $0.17 per share, in contrast to a profit of $21.8M, or $0.10 per share from a year ago, up more than 72% year-over-year, despite a decline in overall sales.

The bottom-line was greatly affected by the decline in company expenses, which fell more than 10% during the quarter, to total $196.7M, as CarMax intensified their efforts to reduce store and corporate overhead expenditures.

As for the company's financial arm, CarMax Auto Finance, it too posted a solid profit of $28M for the quarter due to an increase in funding costs. That is up from the previous year's net loss within the segment of just under $1M. However, CarMax did see a decline in new loans during the recent period, which fell nearly 25% to $15.8M.

Despite an increase in net income, the company posted lower sales for the quarter as consumers remain cautious about big-item purchases. For the 4th quarter, CarMax booked overall revenues of $1.47B, down nearly 28% from last year's total sales figure of $2.04B.

Analysts, on average, were projecting the auto retailer to post quarterly earnings of $0.02 per share on total revenues of $1.62B. Analysts typically exclude one-time charges.

As a key economic indicator, the company's same store sales figures plummeted more than 26% over last year's totals. Contributing to the decline in same store sales, CarMax saw a decrease in used vehicles of nearly 27% during the quarter, while new vehicle sales plunged nearly 42%.

In order to try to push more units, the company needed to reduce selling prices, which in turn, lowered the average selling price for a used vehicle by more than 7% over last year's prices.

"Once again, the most significant factor affecting our sales was a sharp decline in customer traffic compared with the prior year," confirmed CarMax President and CEO Tom Folliard.

Folliard went on to add, "While we experienced a small decline in our share of the late-model used vehicle market for the quarter, we gained market share for the full year. We believe that our superior consumer offer will allow us to continue to gain share over the long term."

For the year, CarMax recorded net earnings of $59.21M, or $0.27 per share, versus the prior year's income of $182.03M, or $0.83 per share, a decline in profits of more than 67%. Yearly revenues declined as well, falling from $8.2B a year ago, to $6.97B, a decrease of 15% year-over-year.

The hardest hit business segment for the company came from their auto-financing arm, which saw overall revenues decline more than 82% year-over-year, slipping from $85.9M to $15.29M.

On a yearly basis, analysts were looking for CarMax to post annual earnings of $0.12 per share on full-year sales totals of $7.14B.

A key to the success of CarMax through these difficult economic times remains the fact that people have less money to spend and that cars are lasting longer. This means that the used car industry may emerge as the leading auto seller throughout the recession. In fact, in February of this year, used car sales were up more than 3% nationwide, while new car sales contracted by more than 41%.

Due to the current economic environment, CarMax was unable to provide forward-looking guidance for the upcoming fiscal year. The company cited the unpredictability of consumer traffic and uncertainty in sales volatility as the reason for not making a valid estimate.

Having traded in a range between $5.76 and $21.99 per share over the past year, shares of KMX were up more than 6% in Thursday's trading session, adding $0.77 to end the day at $13.23 per share.

By BetterTrades