KMX · CarMax, Inc.

CarMax's Q1 FY2027 results reflect a mixed quarter as the company navigates pricing adjustments to stimulate demand while making progress on cost reductions. Revenue increased 6.2% to $8.0 billion, supported by higher average selling prices in both retail (+4.5%) and wholesale (+5.1%) segments. However, retail used unit sales were flat year-over-year, with comparable store sales declining 0.8% as pricing actions weighed on per-unit gross profit, which fell to $2,177 from the prior year's record $2,407. Wholesale units grew 8.4%, providing a cushion with gross profit per unit remaining stable at $1,046. SG&A expenses fell 3.7% to $635.2 million, driven by lower compensation costs, and SG&A per total unit improved 6.8% to $1,619, signaling progress toward the $200 million exit rate savings target for FY2027. CarMax Auto Finance income dipped 1.0% to $140.2 million, but penetration expanded 150 basis points to 43.3% as the company executed its full spectrum growth strategy. The provision for loan losses decreased to $95.6 million from $101.7 million, partly due to a $25.1 million release related to loans reclassified as held for sale. Operating cash flow was notably weak at $17.6 million versus $299.5 million a year ago, primarily due to working capital outflows from auto loans held for sale. On the strategic front, CEO Keith Barr introduced a four-pillar framework focusing on competitive pricing, seamless customer experience, value-added services, and cost efficiency, with a detailed update expected in late Fall. No share repurchases were conducted in the quarter, but the company maintains $1.31 billion in remaining authorization. Overall, the quarter highlights a transition phase as CarMax balances volume recovery with margin discipline and invests in long-term growth initiatives.