By Nicholas G. Miller
CarMax reported a plunge in quarterly sales and plans to lower prices and increase marketing spending as it tries to regain its footing in the used-car market.
The company is in the midst of searching for a new chief executive after its termination of top executive Bill Nash in November. CarMax has reported falling sales in recent quarters with analysts saying the company is losing market share because consumers view its prices as too high.
"Based on recent results, it is clear CarMax needs change," Interim Chief Executive David McCreight said Thursday on the company's earnings call. "Our average selling prices have drifted upward and appear to be less attractive to customers. To ensure that CarMax is a preferred choice, we will work to shrink the gap between our offering and the marketplace."
The company said it was also increasing spending on marketing, which, together with the price cuts, would temporarily drag down profits. "We are optimistic that our immediate pricing and marketing actions will improve our sales performance, but pressure earnings in the near-term," McCreight said.
Shares fell 1.9% to $40.28 Thursday and are down 51% this year.
CarMax said it would look to cut $150 million in selling, general and administrative spending and reduce the cost of bringing a car to market. It also is investing in improving its digital shopping experience, which the company said is currently too difficult to use.
"We must now focus our energies on making the digital shopping experience easier and shift our digital voice from one that earnestly delivers abundant information to one that focuses on delivering sales," McCreight said.
"It's so easy to buy stuff online. It doesn't matter what it is these days," said Tom Folliard, interim executive chairman. "We need to simplify for the consumer how they go through the process with us."
William Blair analysts Sharon Zackfia and Tania Anderson said in a note Thursday that it could take time for CarMax to record sales growth. "The disconnect in CarMax's business from the broader used car environment raises significant questions about its ability to consistently gain market share," the analysts said. Meanwhile investments in price and marketing may fuel investor concerns "over the costs necessary to return the business to growth," they said.
The Richmond, Va., used-car retailer before the open reported third-quarter net income of $62.2 million, or 43 cents a share, for the quarter ended Nov. 30, down from $125.4 million, or 81 cents a share, in the prior year.
Net sales and operating revenue fell 6.9% to $5.79 billion. Wall Street analysts expected $5.64 billion, according to a survey by FactSet.
Retail used-unit sales fell 8% while comparable store used-unit sales declined 9%.
The company said that for the fiscal fourth quarter, it expects lower retail used-unit margins due to an effort to increase its price competitiveness. It also expects greater marketing spend on a total-unit basis compared with the prior year.
Last month, CarMax said its third-quarter results were being dragged down by a decline in retail unit sales, sharp depreciation in the wholesale business and increased marketing spend.
"What initially looked like a temporary setback last quarter now appears to show deeper challenges," Benchmark analyst Michael Albanese said in a note this week.
Write to Nicholas G. Miller at nicholas.miller@wsj.com.
(END) Dow Jones Newswires
December 18, 2025 12:50 ET (17:50 GMT)
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