Carmax Needs to Reduce Costs Immediately

CarMax (KMX) reported terrible Q3 results on Friday (Call Transcript). The company lost money, has halted store openings and is trying to cut variable costs. Given the industry, this should not be surprising. The investors that are currently disappointed and selling as a result of this press release have been asleep and deserve to lose their money.

But here is where I believe management is not coming up with the goods. They are not reducing fixed costs fast enough. They claim:

The increase in the SG&A ratio was mainly the result of the significant declines in comparable store used unit sales and average selling price. This increase was partially offset by reductions in variable costs. In the current market environment, we continue to reduce variable costs by reducing associate hours and allowing natural attrition to further reduce store staffing. In addition, we have implemented a hiring freeze at the home office and are carefully monitoring expenses at CAF.

A hiring freeze is not going to cut it. You have to reduce all costs, especially fixed costs in absolute terms. This needs to be done now.

Disclosure: None

Comments

[Octoberjay:]

How about we just cut your job? CarMax is trying to do everything it can EXCEPT cut job!!! How dare you off offhandedly suggest they cut more jobs......

Maybe if the food was taken off your table you would see it differntly.

I applaud CarMax and I am PROUD to work for them!!

2008 Dec 22 09:16 AM

[ea327:]

Octoberjay is right. Carmax is doing it the right way. They are doing everything to cut waste, not jobs.

I also applaud Carmax. They have been on the top 100 best places to work list for the past 3 years because they don't cut jobs at the first sign of trouble!

2008 Dec 24 09:12 PM

[User 326586:]

where are from Carmax cut my job 620 to say most 70000 ayear plus jobs waste at Carmax there is alot of it stupid Roadmagazine small study groups wake up stupid Carmax is out for it self watch and see you must not work inservice or this comment is from a corporate person with zero or no education from former Carmax employee


On Dec 22 09:16 AM Octoberjay wrote:

> How about we just cut your job? CarMax is trying to do everything
> it can EXCEPT cut job!!! How dare you off offhandedly suggest they
> cut more jobs......
>
> Maybe if the food was taken off your table you would see it differntly.
>
>
> I applaud CarMax and I am PROUD to work for them!!

2008 Dec 27 12:25 PM

[recontech76:]

if your proud to work for carmax your a fool! any company that lays off with no notice and then out source your job to a company that charges more than they payed you is not a good company. they are trying to cut costs in the one area they shouldn't be. they are cutting back on the reconditioning: every car used to get brakes, used to put tires on cars( cupped tires get rotated so the inside is flipped to the outside), they allow leaks and other small malfunctions, used to have high standards on the appearance of cars. they do that so you can comeback for service. with people being picky and frugle can you afford to cut the things that made you special in the first place.

2008 Dec 31 06:37 PM

[7107ltech:]

Well, It is true KMX management needs a major overhaul. And it does seem to me that when management decided to fire their entire cosmetic dept company wide it was due to managments envy of their underlings ability to earn more money than them. Management was under presure to cut cost so they decided to take it out on the cometic dept. The same goes with their hiring a national vendor to cut/ program their car keys on their lot. They waste thousands more per year at our location then if they would have with the private local vendor. The national vendor charges more per key and makes additional copies of keys when it is not neded. Some of higher line vehs that they don't have the ability to copy/ program get sent to the dealer for a additional cost. The previouse local vender could copy & program all these keys himself and did not even charge KMX for simple keys or procedures to replace or recode lock cylinders. He was not greedy like KMX's corporate. Who even as everyone saw the downturn in the economy four years ago they were expanding their buisness at a rapid pace and while at the same time were falsely inflating numbers on their earnings reports to atract new investors.
What Kmx corporate does not understand, like most larger companies, is that it takes more than screwing their employees out of hard earned wages to save money. If management at KMX actually treated employees with courtesy and respect they would save even more money than they would by intimidating them into doing labor without compensation. But to do this you they would have to have a managment team that has the ability to understand their departments and the ability to perform the duties of the people they are managing.
This is actually the fith year that KMX has made the Fortune 500 "Best Companies To Work For" But if you believe this to be true than you probably still believe in the Tooth Fairy. Anyone who nows anything about Steve Forbes knows he's an idiot. As a KMX employee for over ten years now believe me this company has been rolling down hill fast since its split with CC. Weather or not CC would be better off today I don't know but I do believe CC would still have some future and that KMX would have been a smaller but stronger company than it is today. I think KMX board of directors is a bunch of under achievers with more money to spend than they know what to do with.

Jan 24 09:00 PM

[Joe Carmax:]

The Hell with Carmax!! It was great while it lasted making 80k plus a year as a salesman but a bunch of crap when I had to stand on the floor with 50 other salesman hoping that I would get a "buying customer" when they came through the door. I blame the management for overstaffing during these hard economic times and making commissioned sales personnel suffer. By the way I sold over 750 cars, and what did I get?? A cheap f-ing watch!!! Carmax sucks BALLS!!!!

Jan 30 10:38 PM

[7107ltech:]

Well, since the retalitory layoffs of the recon dept nation wide on 10/01/08. The cosmetic quality of their vehs has gone to hell in a hand basket. All the while the onlot vendors are raping them left & right for poor quality repairs. Aprox 7k employees have been fired from all depts across the nation. The remaining have had there hours cut with no pay increase as the cost of living is skyrocketing. But KMX is still making millions. Why? The remaining ASSociates are willing to take it from them. Good old Tom Foliard & his board of director buddies still are taking their large multimillion dollar bonus while doing nothing to earn it. - R.H.


On 2008 Dec 27 12:25 PM User 326586 wrote:

> where are from Carmax cut my job 620 to say most 70000 ayear plus
> jobs waste at Carmax there is alot of it stupid Roadmagazine small
> study groups wake up stupid Carmax is out for it self watch and see
> you must not work inservice or this comment is from a corporate person
> with zero or no education from former Carmax employee

Jul 01 10:25 PM