CarMax (KMX) Q2 FY2027 Results: Comps Up 13% on a $111 GPU Cut

CarMax (KMX) second quarter fiscal 2027 results, released on September 29, 2026 in its earnings press release and on the earnings call for the quarter ended August 31, 2026, show that a small give-up in gross profit per used unit bought double-digit sales growth, and the results came in ahead of the company's guidance [1][2]. Going into the release, four questions mattered: whether price cuts would win back volume, whether the redesigned extended protection plan (EPP) would add about $35 of margin per unit, how much profit the in-house lender would keep after widening its credit range, and whether a $200 million cost program would lower cost per unit. The first two came in ahead of expectations. SG&A per unit fell 8.8%, but mainly because more units absorbed the same costs, and finance income rose 32.1% while finance penetration fell [1]. The question for growth has moved to whether the volume can last, because the prior-year base was weak and management attributes about half of comparable-store growth to an external tailwind from regulatory enforcement [2].

CarMax is the largest used-car retailer in the United States, selling to consumers with no-haggle prices and a mix of online and in-store steps [3]. Most revenue comes from used-car retail, followed by wholesale auctions and add-on products such as extended protection plans. Its in-house lender, CarMax Auto Finance (CAF), lends to customers buying from CarMax stores and earns a spread [3].

Price cuts bought double-digit used unit growth

Retail volume turned clearly higher in the second quarter. Retail used unit sales rose 13.8% to 227,391, and comparable-store used unit sales rose 13.0%, after a 0.8% decline in the first quarter [1][4]. Gross profit per retail used unit was $2,105, down $111 year over year; the first-quarter decline was $230, and in June the company kept full-year guidance for a decline of about $200 [1][4][5].

For the first time, added volume more than offset the lower profit per unit. Used vehicle gross profit rose 8.1% to $478.6 million; added units contributed about $61 million and the lower unit margin took away about $25 million [1]. The company narrowed its full-year gross profit per unit guidance to a decline of less than $200 and said gross profit per unit would still fall year over year in the third and fourth quarters to support sales [2].

The improvement has clear limits. Comparable-store sales fell 6.3% in the prior-year quarter, so the two-year change is only about 5.9%, and used vehicle gross profit for the first half was still down 1.7% [1]. Management said roughly half of the comparable-store growth came from its own pricing and cost controls and half from Federal Trade Commission (FTC) enforcement of transparent pricing; no independent data verify that split [2].

EPP margin per unit beat the full-year target

The redesigned extended protection plan delivered its per-unit margin gain in the second quarter. The company had planned to finish the national rollout by the second quarter and expected EPP margin per unit to rise about $35 for the full fiscal year [6]. EPP margin per retail unit was $623 this quarter, up $46 year over year [1]. Based on the revenue table, the first-quarter gain was only about $8, so the improvement is concentrated after the rollout.

Other gross profit rose 33.1% to $183.3 million, with EPP margin up $26.5 million and service margin up $22.0 million [1]. The service gain came from cost efficiency and volume and is unrelated to the EPP redesign. EPP margin flows almost entirely into operating profit, but the materials do not confirm that the rollout is complete, and the company still only reaffirms about $35 for the year [2].

CAF income jumped while finance penetration fell

CAF income rose 32.1% to $135.6 million, driven mainly by a lower loan loss provision and one-time gains [1]. The provision fell $28.8 million because the prior-year quarter included extra provision for older loan vintages; this quarter also included a $16.6 million gain on the sale of auto loans and $6.1 million of servicing income [1]. Excluding those two items, income rose about 10%, and a roughly $1.2 billion decline in loans outstanding also reduced the total interest margin [1].

The wider credit range is advancing, but overall penetration fell. CAF's share of Tier 2 (near-prime) volume rose from 10% to 22%, yet net penetration fell from 42.6% to 40.9%, moving further from the 50% medium-term target [1][7]. Management said higher interest rates pushed prime customers toward cash or credit unions and expects full-year CAF income to be slightly lower than in fiscal 2026 [2].

Conclusion

The quarter strengthens the case for the growth engine, and most of the profit gain came from volume, EPP and cost absorption. Pre-tax earnings rose from $127.1 million to $223.1 million, total SG&A rose 4.6%, and the $200 million savings target was maintained; CAF growth relied on non-recurring factors and is hard to extrapolate [1]. On cash, first-half capital expenditures were $180.4 million, below the prior-year period, and the company plans to resume modest share repurchases in the third quarter [1].

This view rests on a single quarter. The next evidence is whether comparable-store sales stay positive and used vehicle gross profit keeps growing while prices are cut again in the third and fourth quarters, whether the EPP gain holds and the rollout is confirmed complete, and whether CAF penetration recovers. About $50 million of one-time pension charges in the second half also needs to be excluded when comparing results [2].

Sources

[1] KMX 8-K filed 2026-09-29 (Q2 FY2027 earnings release, Exhibit 99.1), 2026-09-29, CarMax, 8-K Exhibit 99.1 earnings press release, https://www.sec.gov/Archives/edgar/data/1170010/000117001026000102/q2fy27earningsrelease.htm [2] KMX Q2 FY2027 earnings call summary 2026-09-29, 2026-09-29, earnings call summary (Drillr) [3] KMX 10-K filed 2026-04-15, 2026-04-15, CarMax, 10-K annual report, https://www.sec.gov/Archives/edgar/data/1170010/000117001026000021/kmx-20260228.htm [4] KMX FY2027 Q1电话会 — 零售单位毛利与同店 (Q1 FY2027 earnings call: retail gross profit per unit and comparable-store sales), 2026-06-17, earnings call, https://seekingalpha.com/article/4915686-carmax-inc-kmx-q1-2027-earnings-call-transcript [5] KMX FY2027 Q1电话会 — 全年单位毛利指引维持 (Q1 FY2027 earnings call: full-year gross profit per unit guidance maintained), 2026-06-17, earnings call, https://seekingalpha.com/article/4915686-carmax-inc-kmx-q1-2027-earnings-call-transcript [6] KMX FY2026 Form 10-K — EPP重做与单位毛利增量 (FY2026 Form 10-K: EPP redesign and per-unit margin gain), 2026-04-15, CarMax, 10-K annual report, https://www.sec.gov/Archives/edgar/data/1170010/000117001026000021/kmx-20260228.htm [7] KMX FY2027 Q1电话会 — CAF中期渗透率目标 (Q1 FY2027 earnings call: CAF medium-term penetration target), 2026-06-17, earnings call, https://seekingalpha.com/article/4915686-carmax-inc-kmx-q1-2027-earnings-call-transcript