By Mackenzie Tatananni

Shares of CarMax sank Thursday after the used-car dealer reported fiscal-fourth-quarter earnings that missed expectations and management sounded the alarm about the looming impact of auto tariffs.

Even after President Donald Trump walked back his original tariffs plan on Wednesday, certain levies remained in place, such as the 25% tax on automotive imports that went into effect at the end of March. The tariff will expand to imported car parts starting May 3, making it more expensive to assemble vehicles in the United States.

"I think it will it will push some folks into looking at used cars, late model used cars, which is interesting because that's what we're seeing a lot of interest in right now," CarMax CEO William Nash said Thursday. "Now, I think over time, what could happen is that the used car prices will also go up."

What's more significant, in Nash's view, is the higher cost of auto parts. "The other thing to think about on the tariffs that impacts our business as well as any anybody that sells used cars, it's just the parts piece," he said.

CarMax must find ways to offset those increases, the CEO continued. Still, he struck an upbeat tone on the earnings call, asserting the company manages inventory "better than anybody in the business."

While CarMax reported increased used-car sales in its fiscal fourth quarter, the latest financial results nevertheless underwhelmed investors and dragged down the stock price Thursday.

CarMax reported earnings of 58 cents a share for the quarter ended Feb. 28, below the 66 cents analysts anticipated, according to FactSet. Net revenue increased 6.7% from a year ago to $6 billion, roughly in line with Wall Street forecasts.

Used-vehicle sales rose 7.5% to $4.84 billion in the quarter, missing analysts' calls for $4.87 billion. The company noted that retail used-unit sales increased 6.2%, while comparable-store used-unit sales rose 5.1% and wholesale units rose 3.1%.

CarMax stock cratered 20% to $64.32, sinking along with the broader market. It was the worst-performing stock Thursday in the S&P 500. Shares of rivals Carvana and AutoNation were down 9.6% and 6.4%, respectively.

The stock remains down 22% since President Donald Trump unveiled the first barrage of tariffs on April 2. Markets rallied on Wednesday after Trump delayed tariffs on most countries for 90 days.

However, the president doubled down on his levies on Chinese imports, and kept tariffs on vehicles, steel, and aluminum in place. Automakers including Audi, Volkswagen, and Jaguar Land Rover have begun to halt shipments to avoid paying tariffs.

CarMax and peers are positioned to capitalize in this environment. As a used-car dealer, CarMax is largely insulated from the effects of tariffs targeting shipments of new models. However, that doesn't mean it's completely immune.

As delays of auto imports will make used cars more readily available, the resulting demand could cause prices to climb, as Nash correctly identified in the earnings call.

Prices are already on the rise. According to auto information provider iSeeCars.com, car prices saw their first year-over-year increase since October 2022, jumping 1% last month. The average used car between one and five years old cost $31,624 in March, up $317 from a year prior.

Write to Mackenzie Tatananni at mackenzie.tatananni@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

April 10, 2025 12:36 ET (16:36 GMT)

Copyright (c) 2025 Dow Jones & Company, Inc.