CarMax earnings fall on weak sales, finance losses
RICHMOND, Va. - Auto retailer CarMax Inc. said Monday its second-quarter earnings plunged 78 percent due to a weak economy, high gasoline prices and losses in its financing arm. The results were worse than analysts expected and the company's shares fell 8 percent.
The Richmond, Va.-based company said earnings for the quarter ended Aug. 31 fell to $14 million, or 6 cents per share, from $65 million, or 29 cents per share, in the same quarter last year.
Total sales fell 13 percent to $1.84 billion from $2.12 billion a year ago. CarMax said same-store sales, or sales at stores open at least a year, tumbled 17 percent during the quarter.
The results fell short of Wall Street estimates. Analysts polled by Thomson Reuters were predicting earnings of 8 cents per share on sales of $1.93 billion.
Shares of CarMax fell $1.31 to close at $15.19 after falling as low as $14.98 earlier in the session. They have traded in a 52-week range of $10.53 to $24.10.
The company's earnings were dragged down by its financing arm, which reported a pretax loss of $7.1 million compared with income of $33.4 million in the same period last year.
The results for CarMax Auto Finance were reduced by $28.2 million for adjustments related to loans that originated in prior fiscal years, mainly projected losses on defaulted loans.
CarMax also said it saw a 51 percent decline in its third-party finance fees, partially affected by a tightening in credit availability from some nonprime finance providers and a decline in the credit profile of its average customer.
Chief Executive Tom Folliard said on a conference call with investors that CarMax is taking the necessary and appropriate steps to navigate through the difficult financial environment.
"Like many U.S. retailers and financial institutions, we had a very challenging summer," Folliard said. "We remain confident that our reduced earnings primarily reflected the impact of the volatile financial marketplace and the weak environment for consumer spending."
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