CarMax (KMX) Stock Slides Despite Earnings Beat as Used-Car Margins Keep Shrinking

TLDR

• CarMax posted a Q4 net loss of $120.7 million, or 85 cents per share, driven by a $141.3 million goodwill impairment charge.
• The stock fell 6.8% in premarket trading on Tuesday.
• Adjusted EPS came in at $0.34, beating the consensus estimate of $0.18; revenue of $5.95 billion also beat expectations of $5.65 billion.
• Retail gross profit per used vehicle dropped to $2,115 from $2,322 a year ago; wholesale profit per unit fell to $940 from $1,045.
• CarMax plans to open four new stores and four reconditioning/auction facilities in fiscal 2027, with capex of around $400 million.

CarMax (KMX) stock dropped 6.8% in premarket trading Tuesday after the used-car retailer reported a fourth-quarter net loss and recorded a $141.3 million goodwill impairment charge.

The Richmond, Virginia-based company posted a loss of $120.7 million, or 85 cents per share, for the quarter. That compares to a profit of $89.9 million, or 58 cents per share, in the same period a year earlier.

Strip out the goodwill charge, though, and the picture looks different. On an adjusted basis, CarMax earned 34 cents per share — well ahead of the analyst consensus of 18 cents.

CarMax, Inc., KMX

Revenue came in at $5.95 billion for the quarter, down 1% year-over-year but above the $5.65 billion analysts had expected.

The goodwill writedown wasn’t a surprise to those watching the stock. CarMax said it was triggered by a sharp drop in its market cap, weaker financial performance across fiscal 2026, and downward revisions to its long-term outlook.

Margins Under Pressure

Used-car margins continued to slide. Retail gross profit per vehicle fell to $2,115 in the quarter, down from $2,322 a year ago. Wholesale gross profit per unit dropped to $940 from $1,045 over the same period.

The company cut prices to push more cars off lots. That worked to a degree — wholesale unit sales rose 3% to 122,781. But average wholesale prices dropped about $270 per unit, eating into gains.

Retail used vehicle unit sales slipped 0.8% year-over-year to 181,188. Comparable store sales were down 1.9%. Average retail selling prices fell roughly $110 per unit.

Combined retail and wholesale volume was nearly flat, up just 0.7% to 303,969 units.

Consumer demand hasn’t helped either. Gasoline prices hovering near $4 per gallon have weighed on sentiment. That’s pushed some buyers toward electric and hybrid options, shifting demand patterns in the used market.

New CEO Sets Tone

New President and CEO Keith Barr used his first quarterly report to signal a shift in tone.

Barr added that the goal is to make CarMax “the obvious choice for customers” through better pricing, a large inventory, and an improved end-to-end experience.

For fiscal 2027, CarMax said it plans to open four new stores and four additional reconditioning and auction facilities. Capital expenditures are expected to come in around $400 million.

The company’s full-year quarterly revenue fell 1% to $5.95 billion.

Adjusted full-year EPS dropped to 34 cents from 64 cents the prior year, reflecting the difficult margin environment across the business.

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