Used-car company CarMax (NYSE:KMX) saw its shares flying after reporting quarterly earnings that beat expectations.
The nation’s largest retailer of used cars, currently operating 192 stores in 41 states nationwide, surged to an all-time record high after reporting first quarter results. Shares rose 12.86% and saw their best day of trading since June 24th, 2014.
For the quarter, net earnings saw an increase of 12.7% to $238.7 million. Adjusted earnings were also up 17.7% year over year at $1.33. Revenue hit $4.79 billion.
Analysts had been expecting a profit of $1.24 a share and revenue of $4.61 billion.
The company also reported that its used vehicles sales saw a decline of 2.3% while the expectation was for a 4.5% decrease.
According to the company, the gain in net earnings was due to a decrease in CarMax’s effective tax rate. The tax rate moved from 37.4% to 25.3% in the first fiscal quarter of 2018.
Chief Executive Bill Nash remarked, “While our comparable store unit sales performance improved significantly from the February 2018 quarter, we believe macro pricing factors still had some effect on our first quarter sales.”
Nash also said on the earnings call, “Our used unit comps for the first quarter were negative 2.3% against another tough year-over-year comparison. The comps were driven by lower traffic and better conversion and represented a significant improvement from the previous quarter. Total used units grew by 1.6%. While used vehicle valuations were still higher than in last year’s first quarter the year-over-year change in our mix adjusted vehicle acquisition cost was more favorable in the first quarter than in the fourth quarter.”
Comparable store used unit sales fell 2.3% versus the prior year’s first quarter. According to the company, the comparable store sales performance primarily reflected lower store traffic. CarMax said the sales were “partially offset by improved conversion, as well as a tough comparison as we lapped our strongest prior year performance.”
CarMax (NYSE:KMX) also announced that it would be opening 12 new stores in the next 12 months and would be looking at metropolitan areas that have a population of 600,000 or less in order to grab “small markets.”
Recently shareholders of the company also voted down a proposal that would require CarMax to report political contributions semiannually and in more detail. The proposal had been rejected by a 70.8% vote at CarMax’s annual shareholders meeting.