CarMax (NYSE:KMX), the nation’s largest retailer of used cars, today reported weak results for the first quarter ending May 31, 2020. Net sales and operating revenues declined 39.8% to $3.23 billion. Net earnings declined 98.1% to $5.0 million and net earnings per diluted share declined 98.1% to $0.03. Nonetheless CarMax stock is up ~12% year-to-date at ~$92/share, even though used car sales are projected to decline. It’s part of the mania on tech stocks that thinks the companies are invincible.
The current quarter’s results included $122.0 million in a CarMax Auto Finance (CAF) provision for loan losses, which included an increase of $84.0 million, or $0.38 per diluted share, based on an estimate of lifetime losses on existing loans resulting from the Corona virus related turmoil and worsening economic factors. Net earnings per diluted share for the current quarter also included a one-time benefit of $0.18 in connection with the receipt of settlement proceeds in a class action lawsuit. CarMax Q1 2021 – Net Sales Drop 40% to $3.2B
“CarMax spent approximately $30 million supporting associates impacted by the Coronavirus, store closures and furloughs. This included providing associates with at least 14 days of pay continuity upon store closure or quarantine, along with continuing medical benefits for associates who were furloughed,” said Bill Nash, president and chief executive officer. “Our associates are crucial to our culture and our long history of success. While the furlough was a difficult decision, we’re pleased to have called back more than 85% of these associates,” added Nash.
As of May 31, 2020, CarMax had $658.0 million in cash and cash equivalents on hand and $1.08 billion of unused capacity on its revolving credit, compared with $58.2 million and $997.3 million, respectively, as of February 29, 2020. Total long-term debt, excluding non-recourse notes payable, declined to $1.71 billion as of May 31, 2020, compared with $1.79 billion as of February 29, 2020.
Nash said he is encouraged by recent trends experienced in late May and June. Used unit sales have continued to gain strength, web traffic is up year-over-year and reaching new highs and leads to Customer Experience Centers have returned to pre-Coronavirus levels.