CarMax, Inc. (NYSE: KMX) entered the new fiscal year on a high note, reporting strong first-quarter sales and double-digit earnings growth. It is capitalizing on the slowdown in the demand for new cars, partly due to tariffs, and rising vehicle prices that have boosted resale values. The company’s flexible omnichannel model –integrating online, offline, and hybrid purchasing options — positions it well to capture the current market tailwinds, but margins face pressure from higher costs for imported spare parts.
The Richmond, Virginia-headquartered used car retailer is expected to report strong earnings growth for the second quarter of FY26 – the report is due on Thursday, September 25, at 6:50 am ET. It is estimated that second-quarter earnings increased to $1.03 per share from $0.85 per share in the comparable period of fiscal 2025. The consensus sales estimate for Q2 is $7.03 billion, which is slightly higher than sales generated in the year-ago quarter.
Stock Slips
CarMax shares hit a 52-week low earlier this year and remain significantly down year-to-date. Despite a strong rebound in the fourth quarter, 2025 has largely been marked by underperformance and investor caution. The stock price has dropped by one-fourth in the past twelve months, making the valuation attractive from an investment perspective. The company’s technology-driven selling strategy and resilient customer behaviour in the most recent quarter, despite macroeconomic challenges, suggest KMX is nearing a turnaround.
“Our Net Promoter Score is the highest it’s been since rolling out our digital capabilities nationwide, supported by new record high online and omni scores reflecting that this experience is resonating well with customers. Our differentiating offering gives us a unique opportunity to reach more customers. To further capitalize on this opportunity, we’re excited to launch a new marketing campaign later in the summer that will bring our omnichannel experience and our digital capabilities to the forefront for a broad set of consumers,” CarMax CEO Bill Nash said at the Q1 FY26 earnings call.
Comps Grow
In the first three months of FY26, sales and operating revenues increased to $7.55 billion from $7.11 billion in the comparable quarter of FY25. Retail used unit sales and comparable store used unit sales increased by 9.0% and 8.1% respectively during the quarter, while wholesale units rose 1.2%. Q1 net income was $210.4 million or $1.38 per share, compared to $152.4 million or $0.97 per share in the prior-year quarter. Earnings and sales beat estimates.
While benefiting from the slowdown in new car demand, due to higher tariffs on imported vehicles and spare parts procured from other countries, CarMax itself faces pressure from elevated costs of parts needed for reconditioning cars. The management expects sales and profitability to get a major boost from its AI integration strategy. However, subdued consumer sentiment and a potential escalation of the trade war pose a risk to CarMax’s financial performance in the remainder of the year.
The average price of CarMax’s stock for the last 52 weeks is $72.01. It has been trading below that level over the past several weeks. On Monday, the shares opened at $58.42.
