Used vehicles retailer CarMax, Inc. (KMX) reported Wednesday a profit for the first quarter that more-than-tripled from last year, boosted by profits at its finance unit CarMax Auto Finance and 23% revenue growth.
Earnings per share for the quarter came in significantly above analysts' expectations, and quarterly revenues also beat consensus estimate.
Standard & Poor's said Tuesday that S&P MidCap 400 CarMax will replace XTO Energy, Inc. (XTO) in S&P 500 after the close of trading on June 25, 2010.
In a statement, president and chief executive officer Tom Folliard said, "We are pleased to report another quarter of healthy increases in both used and wholesale vehicle unit sales. Our 9% increase in comparable store used unit sales reflected the benefit of a continuing gradual rebound in customer traffic, as well as the easy year-over-year comparison. Sales execution remained strong, as our stores were able to maintain the recent gains in the sales conversion rate."
First-Quarter Results
The Richmond, Virginia-based retailer, a Fortune 500 company, reported net income of $101.12 million or $0.44 per share for the first quarter, higher than $28.75 million or $0.13 per share in the prior-year quarter.
On average, fifteen analysts polled by Thomson Reuters expected the company to report earnings of $0.33 per share for the first quarter. Analysts' estimates typically exclude special items.
The results for the latest quarter included a $0.03 per share gain from adjustments at CAF. Meanwhile, the year-ago quarter results included a loss of $0.11 per share for CAF unfavorable items, and a $0.02 per share gain from a favorable litigation settlement.
Net sales and operating revenues for the quarter increased 23% to $2.26 billion from $1.83 billion in the same quarter last year, and topped twelve Wall Street analysts' consensus estimate of $2.09 billion. Used vehicle sales make up about 98% of CarMax's business.
Comparable store vehicle unit sales grew 8% for the first quarter, while comparable store used unit sales increased 9%. Total vehicle unit sales rose 9%, while total vehicle sales in dollars rose 18% from the year-ago quarter.
Among CarMax's peers, Fort Lauderdale, Florida-based AutoNation Inc. (AN) reported in April a sharp increase in profit for the first quarter, led by robust growth both in new vehicle and old vehicle sales. Net income was $55.2 million or $0.32 per share, up from $34.6 million or $0.20 per share in the prior-year quarter. Income from continuing operations rose to $58 million or $0.34 per share from $53 million or $0.30 per share in the year-ago quarter. Quarterly revenues increased 18.6% to $2.85 billion from $2.40 billion in the same quarter last year.
Segmental Details
Used vehicle sales for the first quarter rose 18.3% to $1.83 billion from the prior-year quarter's $1.55 billion, and sales for wholesale vehicles totaled $316.49 million, up 84.5% from $171.50 million in the same quarter last year.
New vehicle sales grew 4.8% to $50.90 million from the year-ago quarter's $48.55 million, while other sales and revenues totaled $62.46 million, down 3.9% from $64.98 million in the prior-year quarter.
Other Metrics
Operating profit for the first quarter more-than-tripled to $164.36 million or 7.3% of revenues, from $47.49 million or 2.6% of revenues, in the prior-year quarter.
Gross profit for the quarter was $333.55 million, up 15.1% from $276.24 million in the year-ago quarter, and gross margin percentage contracted 40 basis points to 14.7% from last year's 15.1%, primarily due to an increase in used and wholesale unit sales. Total gross profit dollars per retail unit increased to $3,236 in the current quarter from $2,911 last year.
CAF income for the quarter was $57.50 million, compared to CAF loss of $21.64 million in the year-ago quarter.
Selling, general and administrative expenses for the quarter were $226.69 million or 10.0% of revenues, higher than $206.23 million or 11.2% of revenues, in the corresponding quarter of the previous year.
Income tax provision for the quarter surged to $63.24 million from $18.75 million in the prior-year quarter.
The company ended the first quarter with cash and cash equivalents of $13.71 million, compared to $133.58 million at end of the prior-year quarter.
"We are once again extremely pleased with our ability to generate strong earnings growth, through a combination of comparable store sales increases, enhanced gross profits, a strong CAF contribution and continuing efforts to control costs and reduce waste throughout the organization. However, while customer traffic appears to be gradually improving, the sales environment remains well below pre-recession levels," Folliard added.
Stock Quote
KMX closed Tuesday's regular trading session at $20.00, down $0.42 on a volume of 3.61 million shares, higher than the three-month average volume of 2.32 million shares. In the past 52-week period, the stock has been trading in a broad range of $13.06 to $26.50.
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