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Author: Alan LittleDate: 2021-12-23

Used car price surge drives CarMax’s (KMX) Q3 beats, shares -5%

CarMax (KMX) shares failed to get out of first gear on Wednesday, falling nearly 5% in New York despite the used car retailer’s Q2 earnings and revenue beats.

Used car retailer CarMax (KMX) traded down 5% in New York on Wednesday despite its publication of a strong Q3 report showing a hike in revenue following a rise in vehicle prices.

CarMax said its earnings per share jumped 15% year-over-year to $1.63 in the three months to 30th November, which was comfortably ahead of the $1.46 Wall Street expectations.

Group revenues fared even better, skyrocketing 64.5% during the same period to $8.5bn, a figure that was a full $1bn above the consensus.

Central to those beats was a healthy rise (+16.9%) in retail vehicle sales which came in at more than 227,000, and a surge (+48.5%) in wholesale transactions with other businesses which totalled 187,630 units.

CEO Bill Nash said CarMax was able to build on its momentum from earlier in the year to deliver “record” sales and best-ever revenues, while also buying back more vehicles from customers.

He added: “Our solid execution, customer-centric omni-channel strategy, and macro factors are driving strong performance across our diversified businesses.”

CarMax has also benefited from a marked uptick in car prices, a trend that has been prevalent across the industry this year that has contributed to the rise in inflation.

Used cars cost 39.8% more in October 2021 compared to 18 months earlier with the surge due in part to a shortage of newer vehicles from major manufacturers including General Motors (GM) and Ford (F).

While CarMax’s report appeared to hit all the right notes, its shares actually slumped into the red when markets opened midweek.

By late morning, KMX had slipped 4.2% with shares changing hands for $131.90.

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