This summary is based on the fourth quarter fiscal 2008 earnings call as conducted by CarMax Inc. (KMX) on April 2, 2008
Management
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Assistant Vice President, Investor Relations: Katharine Kenny
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President and Chief Executive Officer: Tom Folliard
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Executive Vice President and Chief Financial Officer: Keith Browning
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Vice President and Treasurer: Tom Reedy
Key Investors Issues:
- Net earnings declined 48% to $21.8 million, or 10 cents per share, compared with $42.1 million, or 19 cents per share in the prior year.
- Total sales increased 9% to $2 billion compared with $1.9 billion in 2007
- Carmax opened three stores representing a 16% expansion over last year.
Full Year Highlights
- Net income decreased to $182 million or 83 cents per share from $198 million or 92 cents per share last year.
- Sales increased 10% to $8.2 billion from $7.5 billion last year.
- The firm opened a total of 12 superstores, expanding the store base by 16%.
Fourth Quarter Highlights
Total sales increased 9% to $2 billion compared with $1.9 billion in the prior year as comparable store used units sales increased 3%.
- Carmax opened three stores representing a 16% expansion over last year bringing the year end store count to 89 stores.
- Used vehicle revenues increased 11% for the quarter due to a 13% increase in unit sales and a 2% decrease in average selling price.
- The decrease in average selling price was primarily due to a mix shift as consumers focus on older more affordable vehicles and smaller more fuel efficient ones.
- Total used unit sales grew 13% in the fourth quarter and 12% for the fiscal year.
Net earnings declined 48% to $21.8 million, or 10 cents per share, compared with $42.1 million, or 19 cents per share, due to *****
- Traffic increased in both the stores and on CarMax.com as compared to last year and execution in stores was also improved.
- Wholesale revenues remain flat as a 1% increase in unit sales was offset by a slight decrease in the average selling price.
- Wholesale units grew less than retail sales primarily due to a lower appraisal buy rate.
- The total gross profit per unit decreased by $120 due largely to a decline in gross profit per used unit. Nevertheless wholesale profit per unit increased slightly due in part to strong attendance at auctions.
CarMax Auto Finance. CAF generated a pre-tax loss of $1.0 million compared with income of $31.7 million in the prior year as a result of the continuing turmoil and illiquidity in the global asset-backed credit markets.
- CAF provided greater profitability and greater business stability compared with being entirely reliant on third-party financing sources.
- In total CAF income was reduced by $34.6 million or 10 cents per share and recorded a $1 million loss.
- Carmax increased the discount rate from 12% to 17% resulting in a non-cash charge of $14.7 million.
- The firm increased the cumulative loss rate assumptions to 2.9% or 3% for the four most recent public securitizations. These loss adjustments total $8.7 million.
- The SG&A ratio was 10.8% compared to 10.7% in the fourth quarter of last year.
Fiscal 2009 Outlook
An annual store growth plan of approximately 15% is in place.
- Carmax expects to open 14 stores including seven production and seven non-production stores.
- Projections for used unit comps are in the range of -2% to 5%.
- Total revenue growth between 7% and 14% and earnings per share of 78 censt to 94 cents.
A flat gross profit for used and wholesale units is expected.
- CAF will absorb approximately $14 million in incremental funding costs.
- At projected comp levels the firm expects SG&A de-leverage in fiscal 2009. Since the firm expects debt levels to grow we also project higher interest expense.
Key questions and answers from the fourth quarter fiscal 2008 earnings call as conducted by CarMax Inc. on April 2, 2008
