CarMax's quarterly profit, revenue rise as pricing boosts used-car sales

CarMax on Tuesday reported a rise in second-quarter profit and revenue as the used-car retailer leaned on its pricing strategy to drive a rebound in sales.

Shares of the company rose about 3% in premarket trading following the results.

Higher interest rates and a tighter availability of cheap vehicles in an already inflationary environment have been prompting consumers to hold on to their older cars for longer.

Additionally, a shortage of cheaper vehicles in the $10,000 to $15,000 price range has made it difficult for retailers to attract entry-level buyers.

Used vehicles priced below $15,000 had only 29 days' supply, 15 days below the industry average, according to data from Cox Automotive.

However, CarMax has managed to offset those pressures by using pricing actions to chase volume over profit per vehicle.

Its retail gross profit per used vehicle fell to $2,105 in the second quarter from $2,216 a year earlier, while retail used-vehicle sales rose 13.8% to 227,391 vehicles.

CarMax's overall net revenue rose about 20% to $7.9 billion in the three months ended August 31 from a year ago.

Its quarterly profit rose to $165.3 million, or $1.16 per share, compared with $95.4 million, or $0.64 per diluted share, from a year earlier.
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