CarMax, Inc. — Form 10-Q Summary
Reporting period: Quarter and six months ended August 31, 2026 (second quarter and first half of fiscal 2027). Comparisons are with the corresponding fiscal 2026 periods. Amounts are in U.S. dollars; financial figures below are generally in millions unless noted.
Business context
CarMax operates used-vehicle retail, wholesale, related services and CarMax Auto Finance (CAF). In the first half, CAF financed 42.1% of retail used-vehicle unit sales after three-day payoffs and returns. CarMax operated 258 stores at quarter-end.
Financial performance
| Metric | Three months ended August 31, 2026 | Six months ended August 31, 2026 |
|---|---|---|
| Net sales and operating revenue | $7,877.9; up 19.5% | $15,891.4; up 12.4% |
| Gross profit | $799.5; up 11.4%; gross margin 10.1% versus 10.9% | $1,653.9; up 2.6%; gross margin 10.4% versus 11.4% |
| CAF income | $135.6; up 32.1% | $275.8; up 12.9% |
| Net earnings | $165.3 versus $95.4; net margin 2.1% versus 1.4% | $350.9 versus $305.8; net margin 2.2% in both periods |
| Diluted earnings per share | $1.16 versus $0.64 | $2.47 versus $2.02 |
| Operating cash flow | Not presented as a quarterly figure | $900.5 versus $1,085.0 |
Quarterly used-unit sales rose 13.8%, comparable-store used units rose 13.0%, and wholesale units rose 15.9%. Used gross profit per unit declined 5.0% to $2,105; wholesale gross profit per unit declined 13.6% to $858. For the first half, used gross profit per unit declined 7.6% to $2,141. Management attributed the margin pressure principally to pricing actions intended to support sales growth. SG&A increased 4.6% in the quarter but was nearly flat for the first half; SG&A per total unit fell 8.8% and 7.7%, respectively.
CAF income benefited from lower loan-loss provision and a $16.6 million gain on sale of auto loans. The first-half provision for loan losses was $209.0 million versus $243.9 million. CAF’s allowance was $497.3 million, or 3.07% of loans held for investment, up from 2.78% at February 28, 2026. Delinquent accounts were 5.10% of the portfolio versus 5.63% a year earlier.
Financial position and liquidity
- Cash and cash equivalents were $170.5 million at August 31, compared with $122.8 million at fiscal year-end. Restricted cash from auto-loan collections was $604.9 million; it is not equivalent to unrestricted cash.
- Inventory was $3.85 billion, down $282.2 million from February 28. Total assets were $26.07 billion and shareholders’ equity was $6.30 billion.
- Total debt, including $15.72 billion of non-recourse notes payable principally secured by auto loans, was $17.40 billion, down from $18.05 billion at fiscal year-end. The $2.00 billion revolving credit facility was fully available; warehouse facilities had $3.33 billion of unused capacity.
- Operating cash flow was $900.5 million; capital expenditures were $180.4 million; cash used in investing activities was $170.3 million and cash used in financing activities was $677.3 million. Operating cash flow included $579.9 million of proceeds from auto-loan sales.
Material changes, outlook and risks
- Management reported improved sales trends and said it expects to resume share repurchases in fiscal third quarter at a modest pace below the prior average quarterly pace. No shares were repurchased in the reported quarter; $1.31 billion remained under the authorization.
- Management expects full-year fiscal 2027 used gross profit per unit to decline by less than $200, while cautioning that results may vary. It expects CAF income to be slightly below fiscal 2026 and CAF interest margin to be approximately 6.5% for the remainder of fiscal 2027.
- CarMax remains on track for $200 million of SG&A exit-rate savings by fiscal year-end. Approximately $6 million of severance expense is expected in fiscal third quarter; management expects the full savings benefit primarily in fiscal 2028.
- Management targets approximately $35 of incremental EPP margin per unit in fiscal 2027. Capital expenditures are estimated at approximately $400 million for fiscal 2027.
- Management estimates a roughly $50 million pension settlement charge in fiscal 2027, with relatively similar amounts expected in the third and fourth quarters.
- Key exposures include used-vehicle pricing and inventory, consumer demand and interest rates, CAF credit losses and delinquencies, access and cost of financing, securitization and warehouse-market conditions, competition, execution of the growth strategy, and regulatory, technology and litigation risks. Management said there were no material changes to its previously disclosed risk factors or market-risk disclosures.
- A securities class action is pending; CarMax says it intends to defend the claims but cannot estimate the likelihood or amount of potential loss. The Volkswagen portion of the Takata settlement remains unresolved, and any potential gain cannot be reasonably estimated.
Important facts for investors to verify
- Whether unit growth can continue while used and wholesale gross profit per unit remain under pressure.
- CAF credit quality and the effect of expanded Tier 2 lending on future provisions, delinquencies and allowance levels.
- Progress against the $200 million SG&A savings target, including implementation costs and the timing of realized benefits.
- Actual CAF income, margins and share repurchases compared with management’s fiscal 2027 outlook and leverage objectives.
- Funding-market capacity and costs, particularly for CAF warehouse facilities and securitizations, and developments in the pending litigation and pension settlement.