CarMax(KMX) - 2025 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - For Q4 FY 2025, total sales reached $6 billion, a 7% increase year-over-year, primarily driven by higher volume [12] - Net earnings per diluted share were$ 0.58, up 81% compared to the previous year, with adjusted EPS at $0.64, doubling from a year ago [23] - Total gross profit was$ 668 million, reflecting a 14% increase from the same quarter last year [23] - SG&A expenses for Q4 were $611 million, up 5% from the prior year, but leveraged by 770 basis points due to growth in gross profit [26] Business Line Data and Key Metrics Changes - Retail unit sales increased by 6.2% in Q4, while used unit comps were up 5.1% despite one less selling day [12] - Retail gross profit per used unit reached a record$ 2,322, up from $2,251 in the previous year [14] - Wholesale unit sales increased by 3.1% year-over-year, with wholesale gross profit per unit at$ 1,045, down from $1,120 [14][15] Market Data and Key Metrics Changes - CarMax's market share for age zero to 10-year-old used vehicles was 3.7% in calendar 2024, consistent with 2023 [13] - The company experienced a recovery in market share during the second half of 2024 after initial pressure in the first half [13] Company Strategy and Development Direction - The company aims to achieve ongoing growth in retail and wholesale unit sales and market share, targeting double-digit EPS growth for years to come [49] - Plans include opening six new store locations and four stand-alone reconditioning and auction centers in FY 2026, up from five and two, respectively, in FY 2025 [33] - The focus is on enhancing digital capabilities and customer experience, with a new marketing campaign planned to highlight omnichannel experiences [47] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to gain further market share and achieve significant earnings growth despite macroeconomic challenges [14][50] - The company is closely monitoring the impact of potential new car tariffs on used car prices and consumer behavior [78][80] - Management highlighted the importance of operational efficiencies and cost management in response to rising parts costs due to tariffs [80] Other Important Information - CarMax was recognized by Fortune Magazine as one of the 100 best companies to work for for the 21st consecutive year [51] - The company opened its 250th store during the fourth quarter, marking a significant milestone [52] Q&A Session Summary Question: Insights on share losses in the first half and gains in the second half - Management attributed the share losses to a significant price correction in the previous year and highlighted improvements in customer experience and inventory acquisition as drivers for the second half gains [60][64] Question: Quarter-to-date used comp trends and impact of new car tariffs - Management reported strong comp trends in December and January, with high single-digit growth expected in the first quarter [72][74] Question: Inventory acquisition strategy amid tariff uncertainty - Management emphasized their expertise in inventory management and the ability to adapt to changing market conditions, ensuring a robust inventory strategy [128] Question: Service gross profit improvement - Management noted that efficiency improvements, cost coverage, and positive sales contributed to the better performance in service gross profit [134][136]