After a difficult nine quarters of comparable unit declines, CarMax reported a +4.3% increase in comparable units for the June-August 2024 quarter, as well as solid unit economics (gross profit per unit). CarMax manages for stable unit economics, and at $2,269 per unit, unit economic trends were steady and profits ex-financing increased nicely. The comparable-unit increase also yielded much improved 2- and 3-year CAGRs. In prior Anchor stories, we expressed concern about CarMax’s leading position in the used market that appeared to be squeezed between Carvana and the franchise dealers. And so, how much of the improvement is CarMax’s out-executing versus an improvement in industry growth (stemming from easing interest rates, a bounce back from the DMS outage, and the like)?
The answer? A little bit of both as the charts below show. Quarter-over-quarter, the industry improved by 1,260 basis points (i.e., a lot).
Moreover, CarMax outperformed the industry by 50 bps. Outperformance is predicated on having better inventory than the industry (at large) and CEO Bill Nash said, “We were able to source and have for sale more, less than $25,000 cars and more 0 to 4 cars, which I think is great. And then, of course, we're also in this much more of a stable pricing environment.“
When we look at Placer’s quarterly traffic, we see that a lot of the growth is being driven by eight power locations in California, mainly SoCal. On a pre-pandemic basis, these locations have seen a +35% increase in visits, whereas the chain is flat. On a 12-month basis, the eight locations represent 6% of CarMax’s traffic and for the quarter, these locations saw visits up +8%.
What’s driving the eight? Well, one is demographics; these locations have 25% of their captured trade area from markets averaging over $150K in household income, which is 25% above the CarMax Los Angeles average. The second table below shows the strongest growth demos for CarMax and these represent 32% of the visitors to the Growth cohort. Continued momentum within these demos is an important dynamic to CarMax’s market share growth aspirations, as well as attaching to the more affluent buyers in the market.
The table below shows the strongest growth demos for CarMax and these represent 32% of the visitors to the Growth cohort. Continued momentum within these demos is an important dynamic to CarMax’s market share growth aspirations, as well as attaching to the more affluent buyers in the market.
Where is CarMax doing less well? Texas, as shown below.
