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CarMax Inc KMX

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CarMax's Analyst Day Could Signal the Company Moving Into a Higher Gear

Analyst Note

| David Whiston, CFA, CPA, CFE |

CarMax held a May 6 analyst day to expand on its digital capabilities and introduced a fiscal 2026 revenue target of approximately $33 billion (about 12% compound annual growth from fiscal 2021’s approximate $19 billion), growing market share of 0- to 10-year-old vehicles to over 5% by the end of calendar 2025 from 3.5% in 2020, and selling a combined 2 million retail and wholesale vehicles by fiscal 2026 versus nearly 1.2 million in fiscal 2021. We think CarMax has a good chance to achieve these robust growth targets because of the highly fragmented nature of the sector, its already leading position and brand equity, and management’s embrace of omnichannel shopping capabilities enabling consumers to shop for a vehicle in any blend of digital or brick and mortar they choose. Also, we feel that an industry-leading 30-day money-back guarantee gives customers a reason to trust CarMax and makes the firm a worthy rival to digital startups like Carvana.

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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 at the end of fiscal 2021 plus one new vehicle store. 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 83% of revenue, wholesale about 14%, and the remaining portion is composed of extended service plans and repair. In fiscal 2021, the company retailed and wholesaled 751,862 and 426,268 used vehicles, respectively. CarMax is the largest used vehicle retailer in the U.S., but still estimates that it has only about 3.5% U.S. market share of vehicles 0 to 10 years old but seeks over 5% by the end of calendar 2025. CarMax is based in Richmond, Virginia.

12800 Tuckahoe Creek Parkway
Richmond, VA, 23238
T +1 804 747-0422
Sector Consumer Cyclical
Industry Auto & Truck Dealerships
Most Recent Earnings Feb 28, 2021
Fiscal Year End Feb 28, 2022
Stock Type Cyclical
Employees 26,889