CarMax (KMX) Stock: Falls 18.6% After Disappointing Q2 Earnings

TLDR

• CarMax stock drops 18.6% after weak Q2 earnings, lower vehicle sales hit revenue.
• CarMax sees 5.4% dip in retail vehicle sales, impacting Q2 earnings and stock price.
• Weaker-than-expected sales, higher loan loss provisions send CarMax shares tumbling.
• CarMax Q2 earnings down; stock falls 18.6% as sales, margins decline across segments.
• CarMax suffers from slower vehicle sales, rising loan loss provisions, stock plummets.

CarMax (KMX) stock saw a steep 18.6% drop to $46.44 following the release of its second-quarter earnings for fiscal year 2026.

CarMax (KMX)

The company’s shares began the session around $59 but tumbled after CarMax reported weaker-than-expected sales and financial results. The results, which showed declines across several key metrics, have sparked concerns about the company’s performance and outlook.

Declining Sales and Profit Margins Weigh on CarMax

CarMax’s second-quarter sales were underwhelming, with a notable 5.4% drop in retail used vehicle unit sales. Comparable store used unit sales also fell by 6.3%. The wholesale vehicle business experienced a modest 2.2% decline. The company’s total revenue from retail used vehicles dropped by 7.2%, further impacting overall financial performance.

Despite the lower sales volume, CarMax maintained solid unit margins, with gross profit per retail used vehicle at $2,216. Wholesale unit margins were stable, with gross profit of $993 per vehicle. Extended Protection Plans (EPP) also showed consistent margins, but overall, the decrease in vehicle sales led to a drop in total gross profit, which fell 5.6% compared to the same period last year.

CarMax Auto Finance Faces Rising Loss Provisions

CarMax Auto Finance (CAF) reported an 11.2% decline in income to $102.6 million. The decrease was attributed to higher provisions for loan losses, which outweighed the growth in net interest margin. CAF’s provisions for loan losses totaled $142.2 million, up significantly from $112.6 million a year earlier. This increase was largely due to a higher estimate of lifetime losses on loans from 2022 and 2023.

While tightening underwriting standards are expected to help improve loan performance in the future, the company is still dealing with the challenges posed by its older vintages. CAF’s interest margin percentage did rise to 6.6%, reflecting a 50-basis point increase from the previous year. However, this was not enough to offset the higher provisions and other challenges in the business.

Strategic Cost Reductions to Offset Sluggish Performance

CarMax remains focused on reducing costs to improve profitability. The company has committed to cutting SG&A expenses by at least $150 million over the next 18 months. A decrease of 1.6% in SG&A expenses was noted in the second quarter, but the savings were not enough to offset the overall decline in gross profit.

CarMax’s CEO, Bill Nash, expressed confidence in the company’s long-term strategy despite the quarterly setbacks. The company also remains committed to its new brand positioning campaign, which it launched in August 2025. The “Wanna Drive?” campaign aims to strengthen its omni-channel experience, allowing customers more flexibility in how they purchase vehicles.

 

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