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CarMax’s Mix Drives Earnings Higher

CarMax’s Mix Drives Earnings Higher Featured

Executives at CarMax Inc. attribute the company’s success to a pretty simple idea: selling what people want.

They said the mix of vehicles positively impacted their earnings in the company’s latest quarter. CarMax reported net earnings growth of 20.7 percent in its latest quarter.

The vehicle mix improved compared to last year’s offerings. Their percentage of sales in large and medium SUV’s and trucks rose to 27 percent, which is about three points higher than the prior quarter.

“So even last year, when we were little bit lower in large SUV’s and trucks, we were still putting what folks wanted to buy and what were also a good deal for them,” said CarMax CEO Bill Nash. “So I think the supply has increased on these vehicles and has driven price down somewhat but again we’re going to buy what the consumers want.”

The company’s new online appraisal initiative helped CarMax stock the right vehicles. The online system allows customers to receive a value for their vehicle before coming into the store.

CarMax executives view buying inventory directly from consumers as a better value proposition.

“It is more profitable than buying it off-site so we’re always trying to drive as much as possible through the line but even given this quarter where we were allowed a little more off-site purchases because the volume, we’re still able to maintain gross profit per unit,” Nash said.

Even though CarMax is stocking more SUV’s and minivans, the average selling price remains down a bit. Nash said that this could be attributed to the acquisition prices.

“I think this speaks to the execution that the stores are doing and the great things that are buyers do, making sure that they’re getting the best price and really at the end of the day that’s really where it starts,” Nash said. “You have got to buy the vehicles at the right price so lower acquisition prices more than offsetting the increase that you would normally see from the mix shift.” 

Last modified on Wednesday, 12 July 2017 16:05
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