CarMax, Inc. — FY2024 Form 10-K
Reporting period: Fiscal year ended February 29, 2024 (compared primarily with the year ended February 28, 2023). CarMax operates used-car retail and wholesale operations and CarMax Auto Finance (CAF); it had 245 stores in 109 U.S. markets at year-end.
Key financial and operating metrics
| Metric | FY2024 | Change vs. FY2023 |
|---|---|---|
| Net sales and operating revenue | $26.536 billion | Down 10.6% |
| Gross profit | $2.713 billion; 10.2% of revenue | Down 3.1%; margin was 9.4% in FY2023 |
| CAF income | $568.3 million | Down 14.3% |
| SG&A | $2.286 billion; 84.3% of gross profit | Down 8.1%; ratio improved from 88.8% |
| Net earnings / diluted EPS | $479.2 million / $3.02 | Net earnings down 1.1%; diluted EPS down 0.3% |
| Operating cash flow | $458.6 million | Compared with $1.283 billion in FY2023 |
| Capital expenditures | $465.3 million | Compared with $422.7 million |
| Cash and cash equivalents | $574.1 million | Compared with $314.8 million |
| Total debt, including non-recourse CAF notes | $18.783 billion | Compared with $18.382 billion |
Retail used-vehicle sales were 765,572 units, down 5.2%; comparable-store used units fell 6.7%. Average retail selling price declined 4.3% to $27,028, while used gross profit per unit held at $2,288. Wholesale sales were 546,331 units, down 6.6%, and wholesale gross profit per unit was $1,019. Retail gross margin is not separately presented as a standalone measure; gross profit was 10.2% of consolidated revenue.
CAF’s managed receivables totaled $17.39 billion. Its net interest margin was 6.0% of average managed receivables, down from 6.9%. Net credit losses rose to $334.9 million, or 1.93% of average managed receivables, from $242.8 million, or 1.49%. Past-due accounts increased to 5.44% from 5.00%; the allowance was $482.8 million, or 2.78% of ending managed receivables.
CarMax reported current assets of $5.227 billion and current liabilities of $2.312 billion. Its $2.0 billion revolving credit facility was undrawn and fully available at year-end. The company said it was in compliance with applicable financial covenants. Reported total debt includes $16.867 billion of non-recourse notes principally secured by CAF auto loans; it should not be viewed as equivalent to corporate recourse debt.
Material changes and notable items
- Revenue declined as used-vehicle units and average selling prices fell, reflecting affordability pressures and lower vehicle values. Used-vehicle revenue decreased 9.2%; wholesale revenue decreased 16.9%.
- Gross profit declined less than revenue, and SG&A fell 8.1%, improving SG&A as a share of gross profit. Lower overhead included a $67.2 million benefit from Takata airbag settlement proceeds.
- CAF income fell amid higher funding costs and a lower interest-margin percentage, despite higher customer rates and a modestly lower loan-loss provision. The weighted-average contract rate rose to 11.2% from 9.7%.
- Operating cash flow decreased to $458.6 million. Management notes that changes in CAF auto loans receivable and related non-recourse funding materially affect the presentation of operating and financing cash flows.
- FY2024 net earnings included a $0.32-per-diluted-share benefit from Takata settlement proceeds. The company received $67.2 million of net settlement recoveries during FY2024, including $59.3 million in April 2023 and $7.9 million in August 2023.
Outlook, management commentary and risks
- Management does not provide a specific FY2025 earnings forecast in the supplied filing text. It targets more than 2 million combined annual retail and wholesale units, extending the timeframe to FY2026–FY2030 because of market-recovery uncertainty. CarMax expects to reach its $33 billion revenue and more-than-5% nationwide share goals sooner than the unit target, but did not provide updated timing for those goals.
- For FY2025, management expects low-single-digit gross-profit growth will be needed to leverage SG&A; its longer-term initial goal is an annual SG&A-to-gross-profit ratio in the mid-70% range. It expects advertising spend per total unit to remain approximately $200 and anticipates FY2025 capital expenditures of $500–$550 million.
- CarMax plans to open five stores, one standalone reconditioning center and one standalone auction facility in FY2025. It said it would modestly accelerate share repurchases relative to the pace established after resuming them in FY2024; $2.36 billion remained under its authorization at year-end.
- Management cited inflation, elevated interest rates, tighter lending standards and weak consumer confidence as continuing vehicle-affordability and demand headwinds. Other principal risks include used-car price depreciation and inventory sourcing, CAF credit losses and funding access, competition, cybersecurity and privacy, regulation, and litigation.
- A California wage-and-hour/PAGA matter remained pending; the company said it could not reasonably estimate a loss range. The filing also notes vehicle-recall exposure: CarMax cannot perform manufacturer-authorized recall repairs and some vehicles may have unrepaired recalls, with recall information reviewed with customers.
- CarMax said it would replace its 30-day/1,500-mile money-back guarantee with a 10-day guarantee in May 2024. KPMG issued unqualified opinions on the financial statements and internal control over financial reporting; management also concluded controls were effective.
Important facts for investors to verify
- Whether used-vehicle demand, comparable-store units and vehicle values stabilize, and whether management’s FY2025 gross-profit and expense assumptions are achieved.
- CAF delinquency, charge-off and recovery trends; the adequacy of its loan-loss allowance; and the cost and continued availability of securitization and warehouse funding.
- The distinction between corporate debt and CAF non-recourse notes, including the maturity and refinancing of the $300 million term loan due June 2024 and warehouse-facility renewals.
- The sustainability of cash generation after CAF receivable growth, capital spending and planned share repurchases.
- Developments in the California PAGA arbitration and unresolved Takata residual or Volkswagen settlement matters.