CarMax Stock Plummets on Significant Q2 Earnings Miss
Used car retailer's profits fall nearly 38% short of Wall Street estimates, sparking concerns over consumer demand and market headwinds.
Shares of CarMax, Inc. (KMX) experienced a dramatic sell-off, plunging over 20% after the company announced second-quarter earnings that fell significantly short of analyst expectations. The nation's largest retailer of used vehicles reported earnings of $0.64 per share, a stark contrast to the Zacks Consensus Estimate of $1.03, raising alarms about the company's ability to navigate a challenging economic landscape.
The disappointing earnings report, , has intensified investor concerns about the health of the used car market. CarMax's total revenue for the quarter ending August 31, 2025, was $6.59 billion, a 6% decrease year-over-year and below the anticipated $7.05 billion. This decline was driven by a 5.4% drop in retail used unit sales and a 6.3% decrease in comparable store sales, signaling a pullback in consumer spending.
In addition to the sales slowdown, CarMax Auto Finance (CAF) saw its income decrease by 11.2% to $102.6 million. The decline was largely due to a higher provision for loan losses, which climbed to $142.2 million. The company cited worsening performance in loan vintages from 2022 and 2023 as a key factor. In response to the challenging quarter, CarMax announced plans for significant cost-cutting measures, with a target of at least $150 million in SG&A expense reductions over the next 18 months.
The market's reaction to the earnings miss was swift and severe. In the wake of the announcement, investment firm Wedbush and slashed its price target. This move reflects a broader apprehension among analysts about the headwinds facing the used car industry, including high interest rates, persistent inflation, and cautious consumer sentiment. As CarMax navigates these challenges, investors will be closely watching for signs of a rebound in sales and a stabilization of its financing arm.
The provided further details on the quarter's performance. The significant stock drop underscores the market's sensitivity to performance issues in the automotive retail sector, with many now viewing CarMax's results as a bellwether for the broader used vehicle market. The coming months will be critical in determining whether the company can successfully implement its cost-saving strategies and adapt to the evolving consumer landscape.