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CarMax reported a 33% decrease in first-quarter profit on Friday as the company sells fewer used vehicles and struggles to compete with the affordability of new models.
The used car retailer reported earnings of 97 cents per share, compared to analysts’ expected 95 cents per share, and revenue of $7.11 billion compared to an expected $7.16 billion. Both are down from last year, when CarMax reported earnings per share of $1.44 and revenue of $7.69 billion.
CarMax stock rose 2% Friday after the company reported earnings for the period ended May 31.
The profitability of used vehicles has fallen as new vehicles have become more available, bolstered by trade-in deals and better offers. As a result, retailers like CarMax have been forced to sell cars at steep discounts.
Revenue from used vehicles fell to $5.68 billion, a 5.4% decrease year-over-year, while wholesale vehicle sales dropped 17% to $1.2 billion. Retail used sales dropped 3.1% and comparable store used unit sales fell 3.8% compared to last year.
“Though average retail selling price declined year-over-year, we believe vehicle affordability challenges continued to impact our first quarter unit sales performance, with ongoing headwinds due to widespread inflationary pressures, higher interest rates, and tightened lending standards,” CarMax said in a statement.
Average retail selling prices fell by $700 per unit, or about 2.7%, according to CarMax. In April, the average price for a used car was down 10% year-over-year to $28,500. But in 2019, before the pandemic when prices spiked, used cars went for less than $20,000 on average.
In a statement, CarMax CEO Bill Nash said he was “encouraged by the trends we saw in the first quarter including continued year-over-year price declines, improvements in vehicle value stability, and ongoing growth in upper funnel demand.” Nash also pointed to the company’s repurchase of more than $100 million worth of shares.