CarMax, Inc. Q2 FY2026 earnings call

Priorities: Focus on price and selection, driving consumer awareness of differentiated experience, delivering SG&A reductions of at least $150 million over the next eighteen months, and generating additional profit through diversified business. Second Quarter Performance: Total sales were $6.6 billion, down 6% compared to the prior year. Retail unit sales declined 5.4%, used unit comps down 6.3%. Wholesale unit sales down 2.2% y/y. Launched 'Wanna Drive' brand campaign. CarMax Auto Finance: Originated over $2 billion, sales penetration 42.6%, weighted average contract rate 11.2%. Closure of 25-B transaction, upsized to $900 million, off-balance sheet treatment. Progress on SG&A efficiencies with AI technology like Sky.

Retail Business: Total sales were $6.6 billion, down 6% compared to the prior year. Retail unit sales declined 5.4%, and used unit comps were down 6.3%. Average selling price was $26,000, a year-over-year decrease of approximately $250 per unit. Second quarter retail gross profit per used unit was similar to last year but down approximately $200 from the first quarter. Wholesale Business: Wholesale unit sales were down 2.2% versus the second quarter last year. Average wholesale selling price increased approximately $125 per unit to $7,900 and wholesale gross profit per unit was historically strong and similar to last year. CarMax Auto Finance (CAF): Originated over $2 billion resulting in sales penetration of 42.6% net of three-day payoffs. CAF income for the quarter was $103 million, down $13 million from FY 2025. Net interest margin on the portfolio was 6.6%, up over 50 basis points from last year.

SG&A: Expect to deliver incremental SG&A reductions of at least $150 million over the next eighteen months. CAF Income: Anticipate CAF income to be flat to slightly down for the full year. 25-B Transaction: Expect gain on sale to be approximately $5 million to $30 million in third quarter income.

Substantial risks and uncertainties affecting forward-looking statements, including macroeconomic factors, consumer credit mix, partner lender behavior, and impact of vehicle price and inflation on certain vintages (e.g., 2022 and 2023 vintages).

Q: Just with regard to used unit sales, could you size the disruption from pull forward in demand?

A: Brian, it's two factors. Buying inventory up leading to depreciation and pull forward. Each month in the quarter was down y/y, but September and month to date are stronger than the quarter.

Q: Just on CAF, can you give an update on CAF income?

A: Enrique says there's a larger provision impact this quarter, but the 25-B transaction will yield gain in Q3. Expect CAF income to be flat to slightly down.

Q: As you think about reinvesting SG&A savings, is there a strategy to price and selection to drive top line?

A: Bill says $150 million in SG&A reductions, some will be reinvested to drive sales. We'll be nimble and have levers to be competitive.

Q: Can you elaborate on CAF servicing fee and credit push?

A: Jon says it's not deep subprime, focused on top half of tier two. There's a cost to servicing, but expect value from the 25-B transaction.

Q: How to walk down to positive unit comps?

A: Bill says web traffic is up, conversion improving. Biggest opportunity is web traffic to selling opportunity.

Q: What about reserve inventory and its impact on sales?

A: Bill says reserved inventory is part of transfers, and we feel good about it, but may add friction to ensure cars aren't held for reserve too long.