CarMax Reports Record Q4 and FY20 Results, Shares Coronavirus Update

Most notably, fourth quarter GAAP EPS of $1.30 beat estimates by $0.16, while revenue of $4.96B (up 14.9% year-over-year) beat by $250M.

Meanwhile, for the fiscal year, net sales and operating revenues increased 11.8% to $20.32 billion. Total used unit sales rose 14.7% in the fourth quarter and 11.2% for the fiscal year.

However, CarMax also revealed that since the first week of March, sales have dropped significantly as the coronavirus situation within the US has rapidly escalated.

“Over the past few weeks, approximately half of our stores have closed or are running under limited operations. For our stores that are open, consumer demand has progressively deteriorated” it said.

As a result, the company has decided to halt its stock repurchase program, pause its store expansion strategy and pare back expenses.

“We expect the peak-pain period to be 2H-March-June, with sales trends remaining highly depressed though starting to ease in 3Q20, with further easing in 4Q20” warned RBC Capital analyst Scot Ciccarelli.

The company has also taken proactive measures to bolster its liquidity by drawing down additional funds. As of March 31, the company had approximately $700 million of cash and cash equivalents on hand, $300 million of unused capacity on the revolving credit facility and $2.5 billion of inventory.

From a debt perspective, at March 31, KMX had $2.5 billion of long-term debt, with no near-term maturities.

Encouragingly for investors, all six analysts covering KMX rate the stock a buy. Their $90 average price target translates into 50% upside potential from the current share price. (See CarMax stock analysis on TipRanks)

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