CarMax Beats Expectations with $1.38 EPS in Q1 FY’26

CarMax, Inc. (NYSE: KMX) has released its financial results for the first quarter of fiscal year 2026, showcasing a significant improvement in earnings per share and a notable increase in retail used unit sales. This article delves into the company’s performance this quarter compared to expectations and provides insights into its future guidance.

CarMax, Inc. Beats Expectations in Q1 FY’26

CarMax, Inc. has exceeded expectations in the first quarter of fiscal year 2026, reporting an earnings per diluted share of $1.38. This marks a 42.3% increase from the previous year’s $0.97, and it surpasses the anticipated EPS of $1.19.

Net sales and operating revenues reached $7.55 billion, slightly above the forecasted $7.54 billion, indicating a robust quarter for the company. The increase in earnings per share was driven by a 9.0% rise in retail used unit sales and an 8.1% increase in comparable store used unit sales.

CarMax’s total gross profit grew by 12.8% to $893.6 million, supported by higher unit volumes and strong unit margin performance. The gross profit per retail used unit reached a record high of $2,407, up $60 from the previous year. Despite a slight decrease of $17 per unit in wholesale vehicle gross profit, the figure remained historically strong at $1,047 per unit. The company’s service margin also improved significantly, rising by $128 per retail unit.

While CarMax’s SG&A expenses increased by 3.3% to $659.6 million, the company achieved a 680 basis point improvement in SG&A as a percentage of gross profit. This was attributed to ongoing cost management efforts and growth in gross profit. The company’s ability to leverage its omni-channel experience and diverse business model has been central to its success in delivering these positive results.

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CarMax Accelerates Share Repurchase Activity in Q1

Looking ahead, CarMax has provided guidance that emphasizes its strategic initiatives aimed at sustaining growth and managing risk. A significant focus is on the expansion of CarMax Auto Finance’s (CAF) non-prime funding program, which is expected to provide greater flexibility in supporting CAF’s full spectrum penetration growth plans. This expansion is intended to mitigate risk while enhancing the company’s ability to finance a broader range of customers.

Despite a 3.6% decrease in CAF income to $141.7 million due to an increase in the provision for loan losses, CarMax remains optimistic about the program’s potential. The company’s weighted average contract rate remained consistent at 11.4%, and the total interest margin as a percentage of average auto loans outstanding improved to 6.5%, up 30 basis points from the previous year. This indicates a stable financial footing for CAF moving forward.

In addition to financial strategies, CarMax accelerated its share repurchase activity, buying back $199.8 million in shares during the first quarter. With $1.74 billion remaining available for repurchase under the current authorization, the company is committed to returning value to shareholders.

CarMax’s future outlook is further strengthened by the opening of two new reconditioning/auction centers in Arizona and Texas, which will support its operations in the Phoenix and Dallas metro markets, respectively. These strategic moves position CarMax well for continued growth and market expansion.

Disclaimer: The author does not hold or have a position in any securities discussed in the article. All stock prices were quoted at the time of writing.