CarMax, Inc.

What they do

CarMax sells used vehicles at retail and wholesale, offers related products like extended protection plans and vehicle repair services, and provides financing through its CarMax Auto Finance (CAF) segment. It operates an omni-channel platform that lets customers buy online, in-store, or a combination of both, with no-haggle pricing.

Revenue drivers

• Retail used vehicle sales — Primary revenue source: sold 780,684 used vehicles in fiscal 2026, producing $26.35B annual revenue in fiscal 2026, down from $26.54B in fiscal 2025.
• Wholesale vehicle auctions — Sold 538,203 vehicles in fiscal 2026; Q1 FY2027 wholesale units rose 8.4% to 162,064, with gross profit per unit of $1,046.
• CarMax Auto Finance (CAF) — Provides financing to retail customers; CAF financed 43.3% of retail used unit sales in Q1 FY2027, with a $16.71B loan portfolio and $140.2M CAF income in that quarter.
• Extended Protection Plans (EPP) and other products — Includes extended service plans, GAP, advertising, subscription revenues, and repair services; Q1 FY2027 EPP margin per retail unit was $580, up $8 from prior year.

Recent performance

In the first quarter ended May 31, 2026, net revenues rose 6.2% to $8.0 billion, with retail used unit sales essentially flat at 230,293 and wholesale units up 8.4%. Net earnings were $185.6 million, down 11.8% from the prior year, and diluted EPS declined to $1.31 from $1.38. Gross profit per retail used unit fell 9.6% to $2,177, reflecting pricing actions, while SG&A per total unit improved 6.8% to $1,619. CAF income decreased slightly to $140.2 million, and CAF penetration expanded to 43.3%.

Strategy

Management introduced a four-pillar strategic framework: Great Offering, Easy Experience, Add Value on Each Transaction, and Run Lean. The goal is to drive strong unit and earnings growth by pricing competitively, improving the omni-channel experience, growing CAF and EPP profitability, and reducing costs through technology and logistics efficiency. A Strategic Update is planned for late Fall to detail key initiatives and milestones.

Risks

• Intense competition — CarMax faces competition from new/used dealers, online platforms, and private sellers, some with more resources, which could pressure margins and market share.
• Macroeconomic sensitivity — Economic downturns, inflation, fluctuating interest rates, and tariffs could reduce vehicle demand and increase financing costs, affecting sales and CAF performance.
• Financing and credit risk — CAF's profitability depends on loan performance; higher delinquencies or credit losses could reduce income, and reliance on third-party financing is critical to sales.
• Execution of strategic initiatives — The new strategy involves significant operational changes, and failure to realize expected benefits could hinder growth and cost reduction targets.

Outlook

Management expects the new strategic pillars to improve operations at scale and deliver sustainable unit and earnings growth. They plan to continue pricing actions to drive sales trends while growing inventory and reducing costs. A Strategic Update in late Fall will provide further detail on initiatives and milestones.