CarMax (KMX) Q1 2024 Earnings Call Transcript Summary
CarMax (KMX) Q1 2024 Earnings Call Transcript
Bullish Points:
1. Sequential quarterly improvements across the business.
2. Reduced SG&A independent of the legal settlement.
3. Delivered strong retail GPU.
4. Increased used saleable inventory units while driving down total inventory dollars 13% year over year.
5. Drove strong wholesale GPU as unit volume continued to recover.
6. Grew CAF's penetration even as consumer rates were raised to help offset higher cost of funds and tightened lending standards.
7. Targeted rate increases on new originations have effectively managed CAF penetration, finance margin, and sales conversion.
8. Loan loss provision in Q1 of $81 million results in an ending reserve balance of $535 million or 3.11% of ending receivables.
9. Continued improvements in the best-in-class prequalification product.
10. Broadly scaling the sixth lender within the FBS platform.
Bearish Points:
1. Total sales of $7.7 billion, down 17% compared to last year, driven by lower retail and wholesale volume and prices.
2. Retail unit sales declined 9.6% and used unit comps were down 11.4%.
3. Wholesale unit sales were down 13.6% versus the first quarter last year.
4. CarMax Auto Finance income of $137 million, down from $204 million during the same period last year.
5. Sequential 9-basis-point adjustment in the reserve receivable ratio reflects unfavorable performance within the existing portfolio and uncertain macro environment.
6. Overall used car market is still depressed.
7. Affordability issue still present with higher average selling prices.
8. Less percentage of zero to four-year-old cars being sold.
9. Tightening credit environment.
10. Challenged sales environment.
In conclusion, CarMax (KMX) has shown some positive signs in their Q1 2024 earnings call, such as sequential quarterly improvements, reduced SG&A, and strong retail and wholesale GPUs. However, there are also several bearish points to consider, including a decline in total sales, retail and wholesale unit sales, and CarMax Auto Finance income. The company faces challenges in the used car market, affordability issues, and a tightening credit environment. It is essential to weigh both the bullish and bearish points to form an objective and neutral perspective on the company's future performance.
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Increasing used inventory units while driving down total inventory dollars. We're masters of inventory management
Crushing it with strong wholesale GPU as unit volume keeps on recovering. We're unstoppable!
Reduced SG&A like a boss, even without the legal settlement. We're saving money left and right
Strong retail GPU, we're making that cash flow like a waterfall!
CarMax is on fire! Sequential improvements across the board, we're unstoppable