CarMax, Inc. (NYSE: KMX) reported second quarter fiscal 2027 results on Tuesday that topped Wall Street estimates, but the company's shares fell as investors focused on profit margins and auto finance guidance for the rest of the fiscal year.
Analysts had expected earnings of about $0.73 per share and revenue near $7.03 billion for the quarter ended August 31, 2026, according to consensus estimates tracked by financial data providers. CarMax reported net earnings per diluted share of $1.16, up 81.3% from $0.64 a year earlier, and net revenues of $7.9 billion, up 19.5%.
#Revenue Rises 19.5% As Unit Sales Increase 14.7%
Combined retail and wholesale used vehicle unit sales reached 387,735 for the quarter, an increase of 14.7% from the prior year's second quarter, CarMax said.
Retail used unit sales increased 13.8%, and comparable store used unit sales rose 13.0%. Gross profit per retail used unit was $2,105, a decline of $111 from a year earlier, which the company attributed to pricing actions supporting sales growth.
Wholesale unit sales increased 15.9%. Gross profit per wholesale unit was $858, down $135 from the prior year's second quarter.
Extended Protection Plan margin per retail unit was $623, up $46 from a year ago. CarMax said the increase was driven by growth in both unit volume and unit margins.
Net earnings for the quarter were $165.3 million, up 73.3% from $95.4 million a year earlier. Total gross profit was $799.5 million, an increase of 11.4%.
#CarMax Auto Finance Income Climbs 32.1% On Lower Loan Losses
CarMax Auto Finance (CAF) income increased 32.1% to $135.6 million, driven by a $28.8 million decrease, or 20.3%, in the loan loss provision, to $113.4 million, the company said. CAF income also included a $16.6 million gain on the sale of auto loans, offset in part by additional loan loss provisioning tied to new Tier 2 originations.
CAF financed 22% of Tier 2 loan volume in the quarter, up from 10% a year ago, and was the largest lender in that segment, according to CarMax. The push into Tier 2 lending gives CarMax a second lever for profit growth beyond vehicle sales, but it also raises the company's exposure to borrowers with weaker credit. Credit performance in the segment has so far matched CarMax's expectations, leaving open whether Tier 2 originations can keep expanding without credit losses rising faster than anticipated.
"We delivered 81% EPS growth as we strengthened our price competitiveness, increased Extended Protection Plan margins, expanded CAF's share of Tier 2 originations, continued to enhance our digital experience, and drove material SG&A leverage," said Keith Barr, President and Chief Executive Officer, in the earnings release.
Selling, general and administrative expenses increased 4.6% to $628.6 million. SG&A per total unit improved by $157, or 8.8%, to $1,621, the company reported.
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#Executives Flag Softer Financing Outlook For Rest Of Year
CarMax Auto Finance EVP Jon Daniels said on the company's post-earnings conference call that CAF income for fiscal 2027 is expected to be slightly lower than fiscal 2026, even after the second quarter's gain, citing variability in the timing and mix of loan funding transactions.
Executives also said gross profit per retail used vehicle is expected to decline for the full fiscal year, though by less than the $200 per unit previously forecast, as the company continues pricing actions to support sales.
CarMax said it expects about $50 million in noncash, nonrecurring charges by fiscal year-end related to terminating its legacy pension plan.
#CarMax Plans To Resume Share Repurchases In Third Quarter
CarMax said it intends to resume share repurchases at a modest level in the third quarter of fiscal 2027. The company did not repurchase shares during the second quarter and had $1.31 billion remaining under its existing authorization as of August 31, 2026.
CarMax also said it will host a virtual Strategic Update on November 3 at 8 a.m. ET, where it plans to detail its growth strategy, key initiatives and milestones.
During the quarter, CarMax opened an offsite auction center and store in Conroe, Texas, and a store in Richland, Washington. The company opened an additional store in Austin, Texas, after the quarter ended.
CarMax describes itself as the nation's largest retailer of used autos, with more than 255 store locations and about 28,000 associates. The company sold approximately 780,000 used vehicles and 540,000 wholesale vehicles during fiscal 2026, according to the earnings release.
CarMax said it plans to report third quarter fiscal 2027 results on December 17, 2026, before the opening of trading on the New York Stock Exchange.
CarMax cautioned that forward-looking statements, including those about its growth strategy, share repurchase plans and financial targets, are subject to risks and uncertainties that could cause actual results to differ. The company cited factors such as competitive and economic conditions, availability of capital, and credit performance in its auto finance portfolio.
Barr said CarMax has a clear strategy and a solid foundation to build on its early momentum. The company's outlook remains subject to risks including continued pressure on per-unit margins, variability in CarMax Auto Finance income, and broader competitive and economic conditions.