CarMax (NYSE:KMX) outlined a strategic plan it calls “Shift into GEAR,” targeting sustained market-share gains, higher earnings and additional operating efficiencies through fiscal 2030.
President and CEO Keith Barr said the used-vehicle market represents roughly $1 trillion in annual consumer spending and remains highly fragmented, with the 10 largest retailers collectively holding about 10% market share. CarMax currently has about a 4% share of the market for vehicles aged zero to 10 years, Barr said.
“The opportunity in front of us is substantial,” Barr said, pointing to the company’s digital capabilities, network of more than 255 stores, national logistics network, reconditioning operations and brand recognition. The company said its store network reaches 85% of the U.S. population.
Four pillars of the growth plan
CarMax’s Shift into GEAR strategy is organized around four pillars: Great Offering, Easy Experience, Add Value and Run Lean. The company intends to improve price competitiveness and vehicle selection, simplify the online-to-store customer journey, increase finance and protection-product income, and reduce operating costs.
On pricing, Barr said CarMax plans to remove hundreds of dollars of cost per vehicle from reconditioning and logistics over the coming years and reinvest those savings into lower vehicle prices rather than structurally sacrificing retail margins. The company has also enhanced its pricing models with more local and real-time market information.
CarMax said it has increased saleable inventory by improving management of local vehicle holds and transfers. The company is also testing faster delivery in select markets, with early results indicating that making vehicles available within days has supported higher sales.
In digital operations, CarMax is redesigning vehicle search, reservation and store-handoff processes. The company is testing a model in which stores own the customer relationship following a reservation, supported by customer experience centers and automated communications. Barr said early testing has been encouraging.
The company also discussed using artificial intelligence across online, phone and store interactions. Barr said digital and voice agents are intended to improve conversion and efficiency while enabling associates to focus on customer interactions where they can add the most value.
Finance and protection-product expansion
CarMax Auto Finance, or CAF, is expected to be a key contributor to the company’s earnings strategy. CAF has historically focused on prime, or tier-one, borrowers and currently manages a $16 billion portfolio, according to Executive Vice President of CarMax Auto Finance Jon Daniels.
The company is expanding into tier-two non-prime lending, where it has historically relied more heavily on third-party finance partners. CAF financed 10% of CarMax’s tier-two volume in the second quarter of fiscal 2026, and that percentage more than doubled in the second quarter of fiscal 2027, Barr said. CarMax aims for CAF to finance 40% of tier-two volume by fiscal 2030, representing about 8 percentage points of total sales.
Daniels said each percentage point of tier-two sales retained by CAF could generate between $8 million and $20 million in additional lifetime pretax income beyond current partner fees, depending on the funding approach. The company expects a blended held-for-sale and held-for-investment approach to generate more than $100 million in annual lifetime pretax income as it approaches its tier-two target.
However, CarMax expects the expansion to pressure reported CAF income initially because lifetime expected credit losses must be reserved upfront on loans held for investment. The company expects CAF income to decline slightly in fiscal 2027 and be roughly flat year over year in fiscal 2028 before accelerating to high-single-digit growth through fiscal 2030.
CarMax also expects to grow extended protection plan, or EPP, profit per retail unit by more than 20% through fiscal 2030. The company recently expanded its MaxCare offering with additional term and deductible options, along with optional wheel, tire and dent protection products.
Cost reductions and financial targets
Under the Run Lean pillar, CarMax plans to digitize reconditioning operations that Barr said still rely in part on paper checklists and whiteboards. The company expects to begin piloting a new software platform next year. It is also moving logistics from a largely point-to-point model toward a hub-and-spoke structure intended to reduce vehicle movements, lower costs and speed deliveries.
CarMax is targeting $200 million in annualized savings exiting fiscal 2027. It also aims to increase the share of customers eligible for an instant online vehicle offer to more than 95%, compared with more than 20% of sellers today who must use a more time-consuming process.
Using fiscal 2026 as a base year and assuming a stable operating environment, CFO Enrique Mayor-Mora said CarMax is targeting:
- Mid-single-digit compound annual growth in used retail units through fiscal 2030.
- Mid-teens compound annual growth in adjusted earnings per share through fiscal 2030.
- Low-double-digit EPP margin-dollar growth.
- Low-single-digit SG&A growth over the plan period.
Mayor-Mora said the company expects retail gross profit per unit to remain generally consistent beginning in fiscal 2027, while savings in reconditioning and logistics are reinvested into pricing. Share repurchases are expected to contribute low-single-digit EPS growth, with most projected earnings growth coming from operating performance.
CarMax plans to maintain a long-term leverage target of 1.5 times to 2 times and expects to allocate about $500 million annually for capital expenditures beginning in fiscal 2028. The investments are expected to support physical-location expansion, standalone reconditioning and auction centers, technology modernization and AI capabilities.
About CarMax (NYSE:KMX)
CarMax, Inc is a specialty retailer of used vehicles and operates one of the largest used-car sales networks in the United States. The company sells a broad selection of pre-owned cars, trucks and SUVs through its retail stores and online platform, offering customers tools for vehicle search, appraisal, financing and purchase.
CarMax also operates a vehicle appraisal and acquisition business, buying vehicles from consumers and other sources for resale through its retail or wholesale channels.
