CarMax Earnings: Used Vehicle Affordability Improves but Remains Challenging

We are not changing our CarMax fair value estimate after the firm reported fiscal 2024 third-quarter results that showed modest improvement in used vehicle affordability. Comparable store unit sales fell year over year by 4.1% for their eighth straight quarterly decline, but it was the smallest decline of that stretch. Diluted EPS more than doubled to $0.52 and beat the $0.43 Refinitiv consensus. Retail average selling prices fell by 4.6% and by under 1% versus fiscal second quarter to $27,228 as used vehicle affordability continues to slowly improve from the chip shortage, a problem that will likely last into calendar 2025 as off-lease volume shrinks as a byproduct of poor new vehicle sales three years prior. Retail vehicle gross profit per unit remained stable year over year at $2,277 while gross margin per retail unit increased by 50 basis points to 8.2%, which, along with auction growth, helped overall gross margin rise by 110 basis points to 10%.