CarMax shares dropped 8.8% after the used-vehicle retailer reported declining year-over-year profitability in its second quarter, overshadowing beats on revenue and earnings per share. Earnings per share of $1.31 exceeded the $0.94 consensus estimate, and revenue of $8.01 billion topped the $7.46 billion forecast, but retail gross profit per used unit fell to $2,177, down $230 from the prior year's record. Total gross profit declined 4.4% to $854.4 million, and net income contracted to $185.6 million from $210.4 million a year ago. Management attributed the margin compression to deliberate pricing actions aimed at boosting sales volume, while newly appointed CEO Keith Barr adds execution uncertainty to the path back to prior-year profitability.
CarMax IncDeliberate pricing actions to boost volume eroded retail gross profit per used unit, compressing margins.