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CarMax Inc KMX

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CarMax's Weak Comparable Unit Sales in Fiscal Third Quarter Not Worrisome to Us

Analyst Note

| David Whiston, CFA, CPA, CFE |

CarMax reported a good fiscal 2021 third quarter despite comparable store unit sales of negative 0.8%, down hard from a 7.5% increase in the prior-year’s quarter. Diluted EPS of $1.42 beat the Refinitiv consensus of $1.14, and we calculate adjusted free cash flow rose 70% to $184.6 million. We are raising our fair value estimate to $93 from $89 on the time value of money since our last update, higher fiscal 2021 and 2022 revenue, and more CarMax Auto Finance income as a percent of revenue for fiscal 2021 and 2022 based on how reported results are trending. We expect good CAF results to continue given the low interest rate environment. In the quarter, CAF income grew 55%, and we calculate 19% growth excluding the impact of a large decline in the loan loss provision.

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Company Profile

Business Description

CarMax sells, finances, and services used and new cars through a chain of 220 used retail stores plus two new vehicle stores. It was formed in 1993 as a unit of Circuit City and spun off into an independent company in late 2002. Used-vehicle sales account for about 85% of revenue, wholesale about 12%, and the remaining portion is composed of extended service plans and repair. In fiscal 2020, the company retailed and wholesaled 832,640 and 466,177 used vehicles, respectively.

12800 Tuckahoe Creek Parkway
Richmond, VA, 23238
T +1 804 747-0422
Sector Consumer Cyclical
Industry Auto & Truck Dealerships
Most Recent Earnings Nov 30, 2020
Fiscal Year End Mar 1, 2021
Stock Type Distressed
Employees 27,050