CarMax Inc. (NYSE:KMX) reported first-quarter fiscal 2027 earnings and revenue above Wall Street expectations, but the stock fell in Wednesday’s premarket trading as investors focused on margin pressure and declining gross profit per retail used vehicle.

Earnings Beat Estimates

The used-car retailer reported adjusted earnings of $1.31 per share, exceeding the analyst consensus estimate of 94 cents. Revenue increased 6.2% year over year to $8.01 billion, beating analysts’ expectations of $7.41 billion.

Gross profit declined 4.4% from a year earlier to $854.4 million. Retail used-vehicle gross profit fell 9.5%.

Gross profit per retail used unit declined $230 year over year to $2,177 from last year’s record level. The company said the decrease reflected pricing actions intended to support stronger sales trends.

CarMax did not repurchase any shares during the quarter. As of May 31, approximately $1.31 billion remained available under its share repurchase authorization.

The company also opened a stand-alone reconditioning and auction center in Locust Grove, Georgia, during the quarter. Cash and cash equivalents totaled $132.2 million as of May 31.

Sales And Operating Metrics

Combined retail and wholesale used-vehicle unit sales rose 3.3% year over year to 392,357 units.

Retail used-unit sales increased modestly, while comparable-store used-unit sales declined 0.8%.

CarMax Auto Finance income fell 1% to $140.2 million. The company attributed the decline to lower loan balances following a $900 million non-prime securitization completed last year, which included the sale of most related residual interests and reduced interest margins.

Vehicle purchases from consumers and dealers declined 4.4% year over year to 322,000 units.

Outlook

The company introduced a new growth strategy centered on four pillars: improving offerings, enhancing customer experience, maximizing transaction value, and running lean operations.

CarMax said the company remains on track to deliver $200 million in SG&A savings this fiscal year.

Despite reporting better-than-expected first-quarter results, CarMax signaled that pressure on vehicle margins is likely to continue as it prioritizes sales growth.

Management reiterated that it expects lower gross profit per retail unit this fiscal year, saying it will continue making pricing adjustments to stay competitive while using operational efficiencies to offset part of the margin impact.

Executives also maintained their full-year guidance for a roughly $200 decline in gross profit per used vehicle, indicating the strategy of sacrificing some margin to drive volume remains in place.

CarMax Price Action

KMX Price Action: CarMax shares were down 5.64% at $49.18 during premarket trading on Wednesday, according to Benzinga Pro data.

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