CarMax, Inc.

CarMax, Inc. (NYSE: KMX) sells used vehicles, buys cars from consumers and dealers, and sells wholesale vehicles at auction. It also earns money from vehicle protection plans, related services and CarMax Auto Finance, which lends to customers buying its retail vehicles.

Its fiscal year ends in February. The latest reported quarter ended August 31, 2026, the second quarter of fiscal 2027. The November 3 strategic update introduced targets through fiscal 2030.

The new operating framework

CarMax targets mid-single-digit annualized growth in retail used units and mid-teens annualized growth in adjusted EPS from fiscal 2026 through fiscal 2030. Adjusted EPS starts from $2.91, compared with reported fiscal 2026 EPS of $1.68.

The reconciliation adds $0.96 for goodwill impairment and $0.35 for restructuring, then deducts $0.08 for tax. Adjusted annual selling, general and administrative expenses start from $2.404 billion, excluding $49.8 million of restructuring charges.

The plan holds retail gross profit per vehicle consistent from fiscal 2027. Several hundred dollars of savings per car from reconditioning and logistics would be reinvested in prices. Adjusted overhead is expected to grow more slowly than vehicle volume, spreading those costs over more sales.

The $200 million annualized overhead savings target at the end of fiscal 2027 dates to April. Capital spending is expected to be about $500 million annually starting in fiscal 2028, compared with April's approximately $400 million plan for fiscal 2027.

Current results provide a starting point

CarMax attributed lower retail profit per vehicle to pricing actions supporting sales. Selling and administrative expenses rose 4.6%, but fell per total retail and wholesale vehicle sold. Extended-protection-plan margin per retail unit increased to $623 from $577.

Financing growth and its timing

Auto Finance targets a 40% share of CarMax's Tier 2 loans by fiscal 2030, versus 22% in Q2. This is a share of one credit category, separate from its 40.9% financing share across all retail vehicles after early loan payoffs.

Loans kept for investment require an upfront provision for expected lifetime losses. The framework projects finance income declining modestly in fiscal 2027, roughly flat in fiscal 2028 and growing thereafter. Loans sold to outside investors have different earnings and cash timing.

Q2 finance income included a $16.6 million loan-sale gain. Its $33 million year-over-year increase also benefited from $28.8 million less provision expense, partly offset by lower interest margin and other changes.

Cash, debt and shareholder returns

First-half operating cash flow was $900.5 million, versus $1.085 billion. It included $579.9 million of loan-sale proceeds and other lending flows. Capital purchases were $180.4 million. Customer lending also requires separate funding.

August cash was $170.5 million, excluding restricted loan-collection balances. Gross debt of $17.403 billion included $15.721 billion of nonrecourse customer-loan funding. Finance leases were another $199.1 million. The company's adjusted leverage ratio was 1.9 times, using debt and earnings measures adjusted for loan funding and rent.

The first half included no ordinary program buybacks. September's results announcement already planned a modest Q3 restart of repurchases. Remaining August authorization was $1.305 billion. Read our analysis of the new pricing and earnings framework.