CarMax, Inc. (KMX): history, ownership, mission, how it works & makes money

A Brief History of CarMax, Inc.

CarMax, Inc. is the largest retailer of used vehicles in the United States, operating with a unique business model that emphasizes customer experience and transparency. The company was founded in 1993 and has since expanded its operations significantly.

Company Overview

As of August 31, 2024, CarMax operates 247 used car stores across the United States, with 164 of these located on owned sites and 83 on leased sites.

Financial Performance

For the second quarter of fiscal 2025, CarMax reported net earnings of $132.8 million, an increase from $118.6 million in the same quarter of the previous year. The earnings per share (EPS) for the quarter was $0.85, up from $0.75 in the prior year.

Revenue Trends

Used vehicle revenues increased by 1.5% in the second quarter of fiscal 2025, driven by a 5.1% increase in used unit sales. However, the average retail selling price decreased by approximately $1,250.

Auto Loans and Financing

CarMax Auto Finance (CAF) is integral to the company’s operations, providing financing options for customers. As of August 31, 2024, total managed receivables stood at $17.77 billion. The net loans originated in the second quarter were $2.16 billion.

Market Position and Strategy

CarMax maintains a strong market position with a focus on enhancing the customer experience. The company has successfully integrated technology into its operations, facilitating online vehicle sales and financing processes. In fiscal 2025, online retail sales accounted for 15% of used unit sales.

Recent Developments

In June 2021, CarMax acquired Edmunds, enhancing its digital retail capabilities. This acquisition has been pivotal in aligning CarMax's operations with evolving consumer preferences.

Debt and Financial Obligations

As of August 31, 2024, CarMax reported total debt of $18.71 billion, comprising various loans and financing obligations. The company has maintained compliance with its financial covenants.

Conclusion

CarMax's strategic initiatives and robust financial performance position it well within the used vehicle retail market as of 2024, reinforcing its commitment to customer satisfaction and operational efficiency.

A Who Owns CarMax, Inc. (KMX)

Major Shareholders

As of 2024, CarMax, Inc. (KMX) has a diverse ownership structure comprising institutional investors, mutual funds, and individual shareholders. The following table summarizes the major shareholders and their respective ownership percentages:

Insider Ownership

Insider ownership plays a critical role in governance and decision-making at CarMax. As of 2024, the following table details the ownership stakes held by key executives and board members:

Institutional Ownership Trends

Institutional ownership continues to be a significant component of CarMax's shareholder base. The following table illustrates the changes in institutional ownership from the previous year:

Stock Performance and Market Capitalization

As of August 31, 2024, CarMax's stock performance and market capitalization are as follows:

Recent Shareholder Activities

In recent months, CarMax has actively engaged in share repurchase programs, reflecting management's confidence in the company's future. The following table summarizes the share repurchase activities:

Conclusion on Shareholder Structure

CarMax, Inc. maintains a robust and diverse shareholder structure, with significant institutional holding and active insider participation. The company's ongoing share repurchase program emphasizes its commitment to enhancing shareholder value.

CarMax, Inc. (KMX) Mission Statement

Mission Statement Overview

CarMax, Inc. aims to provide an exceptional customer experience in the automotive retail industry by offering a hassle-free car buying process. The company emphasizes transparency, quality, and affordability in its offerings.

Core Values

• Integrity: Commitment to honesty and transparency in all interactions.
• Customer Focus: Prioritizing customer needs and experiences to foster long-term relationships.
• Innovation: Continuously improving processes and technology to enhance service delivery.
• Teamwork: Collaborating across all levels to achieve common goals.

Financial Performance (2024)

In the fiscal year 2025, CarMax reported significant financial metrics that reflect its operational effectiveness:

Sales Performance

CarMax's sales performance indicates strong demand for used vehicles:

Market Position and Strategy

CarMax continues to enhance its market position through a robust online presence and customer-centric services. The company reports that online retail sales accounted for 15% of used unit sales in both the second quarter and the first six months of fiscal 2025, reflecting an increase from 14% in the prior year.

Financial Metrics and Ratios

Key financial metrics as of August 31, 2024:

Future Outlook

CarMax plans to open three new store locations and one stand-alone auction facility by the end of fiscal 2025, with estimated capital expenditures in the range of $500 million to $550 million. The company is maintaining a conservative approach to its capital structure while focusing on core business growth.

How CarMax, Inc. (KMX) Works

Business Model Overview

CarMax, Inc. operates as a retailer of used vehicles in the United States. The company sells vehicles directly to consumers through its retail stores and online platforms, and it also purchases vehicles from consumers and dealers. CarMax’s business model is structured around three primary segments: used vehicle sales, wholesale vehicle sales, and CarMax Auto Finance (CAF).

Financial Performance

For the fiscal year ending August 31, 2024, CarMax reported the following financial metrics:

Vehicle Sales and Inventory

In the second quarter of fiscal 2025, CarMax sold a total of 211,020 used vehicles, reflecting a 5.1% increase from the previous year. The average selling price for used vehicles was $26,245, down 4.6% year-over-year. The company also sold 141,458 wholesale vehicles, a slight decrease of 0.3% from the prior year, with an average selling price of $7,768, down 12.9%.

CarMax Auto Finance (CAF)

CAF plays a critical role in CarMax's operations by providing financing solutions to customers purchasing vehicles. Key metrics for CAF for the second quarter of fiscal 2025 include:

Gross Profit Analysis

Gross profit margins are essential for understanding CarMax's profitability. For the second quarter of fiscal 2025, the company achieved the following gross profit per unit:

Store Expansion and Market Presence

As of August 31, 2024, CarMax operated 247 used car stores, an increase from 241 stores the previous year. The company opened two new stores in existing markets during the first half of fiscal 2025.

Debt and Liquidity

CarMax's financial structure as of August 31, 2024, includes substantial managed receivables and debt obligations:

Conclusion

CarMax continues to adapt to market conditions while maintaining a strong presence in the used vehicle market, supported by its financing arm, diversified revenue streams, and ongoing store expansion strategy.

How CarMax, Inc. (KMX) Makes Money

Revenue from Used Vehicle Sales

CarMax generates a significant portion of its revenue from the sale of used vehicles. For the three months ended August 31, 2024, CarMax reported used vehicle sales of $5.68 billion, which accounted for approximately 80.9% of total net sales and operating revenues. This represents an increase from $5.59 billion in the same period of the previous year.

Wholesale Vehicle Sales

In addition to retail sales, CarMax also engages in wholesale vehicle sales, primarily through auctions. For the three months ending August 31, 2024, wholesale vehicle sales totaled $1.15 billion, contributing about 16.5% to total revenues. This figure marks a decline from $1.32 billion for the same period in 2023. The decline in wholesale vehicle revenues is attributed to a decrease in average selling prices and unit sales.

Other Sales and Revenues

CarMax also earns revenue from various ancillary services. For the three months ended August 31, 2024, other sales and revenues amounted to $182 million, which includes:

• Extended protection plan revenues: $121.4 million
• Third-party finance income/(fees), net: $1.4 million
• Advertising & subscription revenues: $34.3 million
• Service revenues: $21.7 million

This segment saw a 13.2% increase in the second quarter compared to the previous year, largely due to increased extended protection plan revenues.

Cost of Sales

For the same period, CarMax reported the following costs associated with sales:

Gross Profit

CarMax's gross profit for the three months ended August 31, 2024, was $760.5 million, representing a gross margin of approximately 10.8%. This is an increase from $696.8 million in the same quarter of the prior year. Key components of gross profit include:

• Used vehicle gross profit: $478.8 million
• Wholesale vehicle gross profit: $137.9 million
• Other gross profit: $143.8 million

CarMax Auto Finance (CAF) Income

CAF contributes to CarMax's revenue through interest and fees earned on auto loans. For the three months ending August 31, 2024, CAF income was $115.6 million. The breakdown is as follows:

Financing and Loan Performance

As of August 31, 2024, CarMax's total managed receivables were approximately $17.77 billion, with an allowance for loan losses of $500.8 million, representing 2.82% of ending managed receivables. The company originated net loans totaling $2.16 billion during the quarter, with a weighted average contract rate of 11.5%.

Unit Sales

For the three months ended August 31, 2024, CarMax sold:

• Used vehicles: 211,020 units (5.1% increase year-over-year)
• Wholesale vehicles: 141,458 units (0.3% decrease year-over-year)

The average selling prices were as follows: