CarMax Q2 In-Line; Shares Fall on Lowered Outlook

CarMax reported fiscal Q2 2008 net income climbed 20% to $54.3 million, or $0.29/share, in-line with analyst estimates. Sales grew 10% to $2.12B, but were lower than expectations of $2.2B. CarMax also cut its full-year EPS guidance to $0.92-$0.98, from $1.03-$1.14 previously, citing an "industry-wide slowdown in auto sales." Analysts had been forecasting full-year EPS of $1.06, on average. CarMax earned $0.92 in fiscal 2007. CEO Tom Folliard said the firm missed its H1 targets, but is "relatively pleased" with sales given current macro-economic and auto retail conditions. "Although our comparable store used unit sales growth was slower than in recent quarters, the improvement in our gross profit per unit allowed us to increase earnings at a rate higher than our sales growth," commented Folliard. As for the downward revised guidance, Folliard blamed "external factors", but declared "regardless of the external environment," CarMax plans to continue adding stores at 15%-20% annually. Shares of CarMax were last down 8.7% to $22.88 in thin pre-market trading. CarMax climbed 5.1% to $25.06 on Tuesday.

Sources: Press release, Bloomberg, MarketWatch
Commentary: CarMax Earnings Preview • A Look At Auto Retailer Board Member Compensation • Expected Earnings Yields For the Auto Retailers
Stocks/ETFs to watch: KMX. Competitors: AN, PAG

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