CarMax (NYSE:KMX) executives said the company made “solid progress” in the fourth quarter of fiscal 2026 by leaning into lower pricing, higher acquisition marketing, and initial digital enhancements to improve sales trends, while also pushing forward with cost reduction initiatives and expanded finance capabilities.
During the call, Interim Executive Chair Tom Folliard introduced Keith Barr as the company’s new President and CEO. Barr, who previously served as CEO of IHG Hotels & Resorts, said his early focus is on putting “the customer at the heart of every decision” and prioritizing a simpler, less friction-filled omnichannel experience.
Leadership transition and near-term priorities
Barr said he has spent his first weeks meeting associates across the organization and reviewing customer and associate experiences across buying and selling journeys, omnichannel capabilities, reconditioning, inventory, pricing, marketing, and cash management. He said the company will begin with three priorities:
- “Make CarMax the obvious and easy choice” through competitive pricing, broad selection, and an end-to-end experience that matches current consumer expectations.
- Use technology, including software, data, and AI, “in practical ways” to reduce friction and improve personalization, inventory matching, and efficiency online and in stores.
- Operate with “more urgency and intention,” changing what is not working and holding the organization accountable.
In Q&A, Barr said one of his focus areas will be reducing friction in the customer journey, noting that in his prior role a key theme was reducing steps for customers: “If it takes us six clicks to do something, how can we make it three?”
Quarterly results show improved sales trend, but earnings pressured by impairment and restructuring
Executive Vice President and CFO Enrique Mayor-Mora said the quarter showed improved sales trends but was weighed down by restructuring costs and a non-cash goodwill impairment. CarMax reported total sales of $5.9 billion, down 1% year over year. Across retail and wholesale, the company sold about 304,000 vehicles combined, up 1% versus the prior-year quarter.
In the retail business, total unit sales declined 0.8% and used unit comparable sales fell 1.9%. Mayor-Mora highlighted that this represented an improvement relative to the second and third quarters, when used unit comps were down 6.3% and 9%, respectively.
CarMax posted a fourth-quarter net loss per diluted share of $0.85 versus earnings of $0.58 in the prior-year quarter. Adjusted earnings per diluted share were $0.34, compared with $0.64 a year ago. Mayor-Mora said results included:
- A non-cash goodwill impairment of $0.99 per share, which he said was driven by a decline in market capitalization during an impairment measurement period and pressured financial performance.
- Restructuring charges of $0.20 per share tied to corporate workforce reductions and the early abandonment of underutilized Edmunds office space.
Total gross profit declined 9% year over year to $605 million. Used retail margin fell 10% to $383 million, primarily due to lower profit per used unit of $2,115, down $207 per unit. Wholesale vehicle margin declined 7% to $115 million, with wholesale gross profit per unit of $940, down $105 per unit, partially offset by higher volume.
Average retail selling price was $26,019, down $114 per unit year over year. Wholesale unit sales rose 3%, while average wholesale selling price fell $268 per unit to $7,776.
Pricing actions, marketing, and digital changes cited as key drivers of sales trajectory
Management repeatedly pointed to pricing as the primary lever behind improved trends. Responding to questions about elasticity, Mayor-Mora said the quarter’s results were driven by a combination of lower prices, increased acquisition marketing, and improvements to the website selling experience, adding that “pricing certainly we believe had the biggest impact.” He said the company has a “very deep understanding of price elasticity,” but does not disclose it externally.
Folliard emphasized that “price matters in this business,” telling analysts the company had allowed prices to drift up and then took actions early in the fourth quarter to become more competitive. He also noted price changes are not uniform across vehicles, describing a more targeted approach: “We’re more likely to drop a car $1,000, like 20% of the cars $1,000 to achieve the $200 price drop.”
In digital, Mayor-Mora said web traffic increased 14% during the quarter and, “for the first time in five quarters,” selling opportunities were “relatively flat as opposed to being down year-over-year.” He added conversion was “relatively flat,” and said the company’s goal is to increase selling opportunities and improve conversion.
On inventory, Mayor-Mora said determining the right inventory level by market will be part of the company’s strategic deliberations, including whether the right level is “less” or “more.” Barr added that he has been impressed with how the team evaluates market trends and customer preferences, including considerations such as adding more EVs or more fuel-efficient vehicles.
Cost reductions, SG&A outlook, and capital allocation updates
Mayor-Mora said CarMax expects fiscal 2027 SG&A exit-rate reductions of $200 million, up from prior guidance of $150 million. He also said the company now expects progress “greater than the FY 2027 exit rate reduction targets we had previously set.” He cautioned, however, that the year-over-year savings within fiscal 2027 are expected to be offset by several factors, including annualizing a materially reduced corporate bonus and share-based compensation in fiscal 2026 (which he said offsets about half of the expected in-year savings), inflation pressures, and new location growth.
He explained that exiting fiscal 2026, the company expects to have about $100 million in savings in place, with “line of sight to another $100 million” of exit-rate savings during fiscal 2027, and said “a full realization” would come with annualization in fiscal 2028.
SG&A expenses in the quarter were $611 million. Excluding restructuring costs, SG&A was $577 million, down 5% from the prior-year quarter. Mayor-Mora cited higher occupancy costs, including a $21 million charge tied to exiting an Edmunds office lease, and a $6 million increase in advertising due to higher acquisition marketing spend.
CarMax repurchased 1.3 million shares for $50 million during the quarter and had $1.31 billion remaining under authorization at quarter-end. Mayor-Mora said with leverage “slightly above” the company’s targeted range and while focusing on improving performance in a transitional period, CarMax has paused share buybacks, though authorization remains in place.
For fiscal 2027 capital expenditures, the company expects about $400 million, down from the past two years. The plan includes opening four new stores, two new off-site reconditioning and auction locations, and two new off-site auction locations.
CAF results and “full spectrum” ambitions
Jon Daniels, Executive Vice President of CarMax Auto Finance (CAF), said CAF originated nearly $1.9 billion in the quarter, with sales penetration of 42.8% net of three-day payoffs, compared with 42.3% a year ago. The weighted average contract rate to new customers was 11.1%, in line with the prior year.
CAF income was $144 million, down $16 million year over year. Daniels said net interest margin was 6.3%, up slightly both sequentially and year over year, and that credit losses were in line with expectations. The loan loss provision was $74 million versus $68 million a year ago. Total reserves ended the quarter at $453 million, or 2.78% of auto loans held for investment.
Daniels said the year-over-year penetration increase reflects expansion into Tier 2, supported by funding strategy and underwriting models, and he expects penetration growth targeting the top half of Tier 2 to accelerate in fiscal 2027. He also said the company designated a $100 million pool of non-prime loans as held for sale during the quarter.
On credit performance, Daniels said customers across much of the credit spectrum are experiencing affordability and inflation stress, with “delinquencies… higher” and “roll rates… higher,” adding that the company has set reserves accordingly.
Separately, Mayor-Mora said CarMax has completed an extended protection plan redesign and begun a national rollout. Daniels described the updated MaxCare extended service plan, including a new MaxCare Plus offering, as designed to improve affordability and penetration, with a nationwide rollout expected by the second quarter of fiscal 2027. Mayor-Mora said the redesign is expected to contribute about $35 per unit in margins in fiscal 2027 as it ramps through the year.
Looking ahead, executives said a broader strategic plan is under development. Mayor-Mora told analysts they may see “some headlines” in June, with a fuller strategy, key metrics, and longer-term objectives expected after that. Barr said he plans to share more about strategy and long-term objectives “in due time.”
About CarMax (NYSE:KMX)
CarMax (NYSE: KMX) is a leading retailer of used vehicles in the United States, offering customers a streamlined, no-haggle purchasing experience. The company’s inventory spans a broad range of makes and models, each of which undergoes a comprehensive inspection process before being offered for sale. Customers can shop in person at CarMax’s retail locations or browse the company’s online platform, which provides detailed vehicle histories, virtual tours and contactless purchasing options.
Originally launched in 1993 as a division of Circuit City, CarMax became an independent, publicly traded company in 1997.
