- CarMax, Inc. (NYSE: KMX) recently stated results for the 4th quarter and fiscal year ended February 28, 2k19. Year-over-year highlights include: Net sales and operating revenues raised 5.7 percent to $4.32B in the 4th quarter. For the fiscal year, net sales and operating revenues raised 6.1 percent to $18.17B.
- Used unit sales in comparable stores raised 2.8 percent in the 4th quarter and 0.3 percent for the fiscal year.
- Whole used unit sales rose 5.6 percent in the 4th quarter and 3.8 percent for the fiscal year.
- Whole wholesale unit sales raised 3.7 percent in the 4th quarter and 9.5 percent for the fiscal year.
- CarMax Auto Finance (CAF) income raised 2.6 percent to $103.7M in the 4th quarter. For the fiscal year, CAF income raised 4.2 percent to $438.7M.
- In the 4th quarter, net earnings raised 57.6 percent to $192.6M and net earnings per diluted share raised 68.7 percent to $1.13.
|*||In connection with the Tax Cuts and Jobs Act of 2k17 (“2k17 Tax Act”), net earnings for the prior year’s 4th quarter were reduced by $11.9M, or $0.07 per diluted share. This net amount included a $32.7M reduction for the revaluation of our net deferred tax asset, partially offset by a $20.8M benefit that resulted from applying the new, lower blended annual tax rate to earnings for the entire year.|
|*||Net earnings for the prior year’s quarter were also reduced by a one-time discretionary bonus of $8.0M, or $0.03 per diluted share net of taxes, paid to eligible associates.|
- For the fiscal year, net earnings raised 26.8 percent to $842.4M and net earnings per diluted share raised 33.1 percent to $4.79. Net earnings for the prior fiscal year were reduced by the 4th quarter items noted above.
4th Quarter Business Performance Review
“We’re happy to report double-digit development in pretax earnings this quarter, even apart from the prior period’s discretionary bonus,” said Bill Nash, president, and chief executive officer. “And, with strong cash flow, we continued returning value to shareholders via our stock repurchase program. We’re also happy with the response to our omnichannel roll-out in Atlanta, where consumers can now buy a car completely from home, in-store or through a seamlessly integrated combination of online and in-store experiences. We remain on track to have this experience available to the majority of our customers by the end of fiscal 2020.”
Sales. Whole used vehicle unit sales raised 5.6 percent, while comparable store used unit sales rose 2.8 percent as compared to the prior year’s 4th quarter. The comparable store sales performance mainly reflected improved conversion, partially offset by lower store traffic. We believe our comparable store used unit sales development was adversely affected by delays in February tax refunds relative to last year, the continuation of higher acquisition prices and a robust competitive environment.
Whole wholesale vehicle unit sales raised 3.7 percent difference with the 4th quarter of fiscal 2k18, mostly driven by the development in our store base.
Other sales and revenues raised 14.6 percent difference with the 4th quarter of fiscal 2k18. Extended protection plan (EPP) net revenues rose 19.9 percent, reflecting the combined effects of favorable adjustments to cancellation reserves resulting from lower cancellation activity, cost declines from plan providers, and raises in our unit volume and product penetration rate. Net 3rd-party finance fees improved $3.3M, reflecting shifts in our sales mix by finance channel, counting a boost in our Tier 2 and a decline in our Tier 3 sales.
Gross Profit. Whole gross profit raised 11.7 percent as compared to last year’s 4th quarter, to $599.4M. Used vehicle gross profit rose 6.6 percent, reflecting the 5.6 percent raise in whole used unit sales. Used vehicle gross profit per unit remained relatively stable at $2,166 difference with $2,147 in the prior year period. Wholesale vehicle gross profit raised 7.0 percent as compared to the prior year’s quarter, driven by the 3.7 percent raise in wholesale unit sales and a boost in wholesale vehicle gross profit per unit to $977 difference with $946 in last year’s 4th quarter. Other gross profit raised 41.6 percent, reflecting the improvements in EPP revenues and net 3rd-party finance fees, in addition to higher service profits. The prior year’s 4th quarter service profits were pressured by the reduced leverage of service department costs and the one-time discretionary bonus, about half of which was paid to service department associates.
SG&A. The difference with the 4th quarter of fiscal 2k18, SG&A costs raised 4.9 percent to $429.0M. Factors contributing to the year-over-year change included the 10 percent raise in our store base since the starting of last year’s 4th quarter (representing the addition of 19 stores); continued spending to advance our technology platforms and support our core and omnichannel planned programs; and a $3.9M raise in stock-based compensation expense. These raises were partially offset by reduced compensation costs resulting from staffing optimization programs. In addition, the prior year’s SG&A expense included about half of the one-time discretionary bonus. SG&A per used unit was $2,380 in the current quarter, down $17 year-over-year. The raise in stock-based compensation expense raised SG&A per used unit by $19.
CarMax Auto Finance.(1) The difference with last year’s 4th quarter, CAF income raised 2.6 percent to $103.7M. The raise reflected the net effects of a 7.8 percent raise in average managed receivables and a slightly lower whole interest margin percentage. The whole interest margin percentage, which represents the spread between interest and fees charged to consumers and our funding costs, was 5.5 percent of average managed receivables difference with 5.6 percent in last year’s 4th quarter. The provision for loan losses raised to $42.1M from $38.6M in the prior year quarter, consistent with the development in average managed receivables. The allowance for loan losses as a percentage of ending managed receivables remained stable at 1.10 percent as of February 28, 2k19, difference with 1.11 percent as of February 28, 2k18.
Conference Call Information
We will host a conference call for shareholders at 9:00 a.m. ET recently, March 29, 2k19. Domestic shareholders may access the call at 1-888-298-3261 (international callers dial 1-706-679-7457).