(Reuters) – Used car retailer CarMax missed Wall Street estimates for second-quarter profit on Thursday as price cuts on used vehicles boosted unit sales but kept margins depressed.
Shares of the company were down 7.6% in premarket trading.
Pre-owned vehicle retailers have had a bumpy ride, with profitability worsening over the last few years as new vehicle availability improved.
The trend is in stark contrast to the pricing power used car sellers commanded during the pandemic, when supply of new vehicles was tight.
CarMax has employed a host of cost-cutting measures over the past few years to protect margins, including slashing marketing and capital expenditures.
The company reported a 2.9% increase in the number of vehicles sold in the second quarter.
However, sales weakness persisted in the wholesale unit, where vehicles are auctioned off to auto dealers. Wholesale revenue in the second quarter fell 12.7% from a year earlier.
Average selling price per vehicle was down 4.6% and 12.9% in used and wholesale units, respectively.
Overall quarterly revenue of $7.01 billion was down about 1% from a year ago, but came in above analysts’ average estimate of $6.79 billion, according to LSEG data.
The company’s earnings per share of 85 cents in the second quarter was below the estimates of 86 cents, but were 13.3% higher than 75 cents a year earlier.
(Reporting by Ananta Agarwal in Bengaluru; Editing by Shreya Biswas)
