Business context and reporting period
CarMax, Inc. filed this Form 10-K for the fiscal year ended February 28, 2022 (fiscal 2022), not a standalone 2021 fourth quarter. CarMax is a used-vehicle retailer with CarMax Sales Operations and CarMax Auto Finance (CAF) reportable segments. It operated 230 stores and completed its acquisition of Edmunds on June 1, 2021.
Financial and operating performance
| Metric | Fiscal 2022 | Change vs. fiscal 2021 |
|---|---|---|
| Net sales and operating revenues | $31.90 billion | +68.3% |
| Gross profit | $3.29 billion | +38.2% |
| CAF income | $801.5 million | +42.4% |
| Net earnings | $1.15 billion | +54.1% |
| Diluted earnings per share | $6.97 | +54.2% |
| Retail used units | 924,338 | +22.9% |
| Wholesale units | 706,212 | +65.7% |
- Used-vehicle revenue rose 55.5%, reflecting 22.9% unit growth and a 26.7% rise in average selling price to $26,207. Wholesale revenue increased 153.4%, driven by higher units and prices.
- Used gross profit per unit was $2,205, up 4.4%; wholesale gross profit per unit was $1,083, up 9.1%. Consolidated gross margin was 10.3%, down from 12.6%, reflecting revenue mix and cost dynamics.
- SG&A increased 36.4% to $2.33 billion, but fell to 70.7% of gross profit from 71.6%. Higher staffing, advertising, technology, growth and Edmunds-related costs contributed to the increase.
- CAF’s managed receivables reached $15.65 billion. CAF income benefited from higher average receivables, improved interest margin and lower loan-loss provision. Net credit losses were 0.80% of average managed receivables; past-due accounts rose to 4.02% from 2.83%.
- Net cash used in operating activities was $2.55 billion, versus $667.8 million provided in fiscal 2021. CarMax attributed the swing mainly to growth in auto loans receivable and inventory; non-recourse funding issuances are reported separately in financing cash flows. Capital expenditures were $308.5 million.
- Cash and cash equivalents were $102.7 million at year-end. Total reported debt was $18.73 billion, including $15.47 billion of non-recourse notes secured by CAF receivables. The $2.0 billion revolving facility had $756.5 million of unused capacity; the company reported compliance with financial covenants.
Material changes versus the prior comparable period
Fiscal 2022 growth followed a fiscal 2021 period materially disrupted by COVID-19, especially in the first quarter. Higher used-vehicle prices and unit sales, increased wholesale activity, expanded consumer-sourced inventory, and the Edmunds acquisition contributed to year-over-year results. Inventory increased 62.3% to $5.12 billion. The company also entered a $700 million term loan, repurchased $576.5 million of stock, and sold its remaining new-car franchise during the third quarter.
Outlook, commentary, risks and unusual items
- Management’s fiscal 2026 targets were updated to 2.0–2.4 million combined retail and wholesale vehicle sales and $33–$45 billion of revenue; it reaffirmed a target of over 5% nationwide share of the age 0–10 used-vehicle market by the end of calendar 2025. The company estimated its calendar 2021 nationwide share at 4.0%.
- For fiscal 2023, CarMax expected to open ten stores, including entry into the New York metro market, and projected approximately $500 million of capital expenditures, about 30% for technology. It expected marketing spend per unit to be at least fiscal 2022’s level. Management said fiscal 2023 would require gross-profit growth above the 5%–8% range to achieve leverage, citing strategic investment timing, growth costs and inflation.
- Management said saleable inventory was positioned to support anticipated first-quarter fiscal 2023 sales. It reported record self-sufficiency rates above 70% in fiscal 2022’s second through fourth quarters, compared with a historical annual range of 36%–41%.
- Key risks include used-vehicle price and supply volatility, inflation and affordability, competition from online and traditional retailers, staffing and reconditioning constraints, CAF credit losses and funding access, interest-rate exposure, cybersecurity and privacy, regulation, and continuing COVID-19 uncertainty. Management noted delinquency increases partly associated with a servicing-system transition and expects them to normalize over time.
- Fiscal 2022 diluted EPS included a one-time $0.11 benefit from $22.6 million of General Motors settlement proceeds; fiscal 2021 EPS included a $0.19 benefit from prior settlement proceeds. The company reported that it could not reasonably estimate potential losses from certain California wage-and-hour matters.
Important facts for investors to verify
- Whether vehicle prices, inventory acquisition costs and unit margins remain sustainable as supply, demand and affordability change.
- Whether CAF delinquencies and credit losses normalize, and whether allowance assumptions adequately reflect future loan performance.
- How much of reported debt is non-recourse and secured by CAF receivables, and the availability and cost of warehouse and securitization funding.
- Execution against store-opening, capital-spending, digital adoption and fiscal 2026 targets, including the expected operating leverage after fiscal 2023.
- The impact of Edmunds integration, continued strategic investment, inflation, staffing and service/reconditioning capacity on margins and cash generation.