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Earnings call · Aug 2026 (Q2 FY27)

CARMAX Q2 FY27 earnings call KMX

Sep 29, 2026 Source

Executive summary

CarMax Q2 FY27 — Strong Unit & Earnings Growth, Share Repurchases Resume

CarMax delivered strong Q2 FY27 results, driven by strategic execution and improved price competitiveness, leading to robust unit and earnings growth. The company is seeing initial benefits from its "Shifting Gears" strategy, which focuses on offering, experience, value, and efficiency. Management is confident in building on this momentum and has announced the resumption of share repurchases.

Highlights

5

  • Used unit comps grew 13% year-over-year.

  • Total units across used and wholesale grew 15% year-over-year to approximately 388,000 vehicles.

  • Earnings per share grew 81% year-over-year to $1.16.

  • Total gross profit increased 11% year-over-year to $799 million.

  • CarMax Auto Finance (CAF) income was up 32% year-over-year to $136 million.

Concerns

5

  • Used retail profit per unit decreased by $111 year-over-year to $2,105.

  • Wholesale gross profit per unit decreased by $135 year-over-year to $858.

  • CAF sales penetration (net of 3-day payoffs) declined to 40.9% versus 42.6% last year.

  • Corporate incentive compensation dynamic expected to remain similar in Q3 FY27 and moderate in Q4 FY27.

  • Approximately $50 million in total settlement-related noncash nonrecurring charges expected in Q3 and Q4 FY27 related to pension plan termination.

Guidance & targets

CategoryTargetConfidence
FY27 full year retail margins per unit
down less than $200 per unit
high materiality
High
Incremental EPP margin
approximately $35 per unit
medium materiality
High
SG&A identified savings
$200 million
high materiality
High
Severance expense
approximately $6 million
low materiality
High
Pension plan termination charges
approximately $50 million in total settlement-related noncash nonrecurring charges
medium materiality
High
CAF income
slightly lower than FY26
high materiality
Medium
Tier 2 originations
nearly $1 billion
medium materiality
High
GPU for Q3 and Q4 FY27
down year-over-year
high materiality
High

KMX operating KPIs by quarter

KMX operating KPIs stated on its earnings calls, by fiscal quarter
KPI Feb 2026 Q4 FY26 May 2026 Q1 FY27This call Aug 2026 Q2 FY27Change vs prior quarter
Average selling price Retail—
$27.288K Average selling price was $27,288, a year-over-year increase of $1,168 per unit. Source transcript
$27.623K Average selling price was $27,623, a year-over-year increase of $1,630 per unit. Source transcript
+1.2%
Average selling price Wholesale
$7,776 Average wholesale selling price declined by $268 per unit to $7,776. Source transcript
$8,364 Average wholesale selling price increased by $405 per unit to $8,364. Source transcript
$8,036 Average wholesale selling price increased by $145 per unit to $8,036. Source transcript
-3.9%
Weighted average contract rate CarMax Auto Finance
11.1% The weighted average contract rate charged to new customers was in line with last year at 11.1%. Source transcript
11.3% The weighted average contract rate charged to new customers was 11.3%, relatively in line with last year's Q1. Source transcript
11.8% The weighted average contract rate charged to new customers was 11.8%, up 60 basis points from the prior year. Source transcript
+0.5 pt

Operating figures the company states on every call, checked against each call's transcript. Click a figure to read the sentence. A dash means it was not stated that quarter.

Product announcements

ProductTypeDetails
Redesigned EPP offeringupdate
Wheel, tire, and dent product offeringlaunch

Deals & partnerships

Elizabeth Bergens Appointment as EVP, Chief Digital and Customer Officer

Elizabeth Bergens, formerly Chief Digital Officer for Volkswagen Financial Services, will join CarMax on October 5 as EVP, Chief Digital and Customer Officer, overseeing marketing, product, and Edmunds teams to unify the end-to-end customer experience.

Jeff Campbell Appointment as SVP, Strategy

Jeff Campbell, with over a decade at CarMax, joined the senior leadership team in August as SVP, Strategy, leading a newly centralized function for strategy, data science, AI, and pricing teams.

Risks & headwinds

Corporate incentive compensation dynamic Q3 FY27 (similar dynamic), Q4 FY27 (moderate)

materially lower corporate incentive compensation in the prior year and strong performance this year

Mitigation:not stated

Pension plan termination noncash charges Q3 and Q4 FY27

approximately $50 million in total settlement-related noncash nonrecurring charges

Mitigation:assets in pension trust expected to fully fund settlement; eliminates potential future corporate funding requirements

Higher interest rate environment impacting CAF penetration ongoing

Weighted average contract rate charged to new customers was 11.8%, up 60 basis points from the prior year. CAF sales penetration of 40.9% net of 3-day payoffs versus 42.6% last year.

Mitigation:CAF increased rates in Tier 1 where customers have more funding alternatives; CAF has flexibility to retain assets on balance sheet or use off-balance sheet transactions.

Diesel and transportation costs rise ongoing

impacted our costs

Mitigation:efficiencies elsewhere have allowed us to offset it

Variability in CAF income and provision expense next 12 to 24 months

timing and mix of these transactions may create near-term variability

Mitigation:expected to decrease as funding strategies mature and become more routine

What to watch in Q3 FY27

FY27 full year retail margins per unit

FY27
Current down less than $200 per unit
Target further improvement or stabilization

Why it matters

Indicates the effectiveness of efficiency gains and dynamic GPU management in supporting sales without excessive margin compression.

We expect FY '27 full year retail margins will be down less than the $200 per unit as compared to FY '26.

Q&A highlights

What were the primary drivers of GPU strength this quarter, specifically the impact of efficiencies versus FTC uplift or retail/wholesale spread?

Enrique stated that the strength was due to balancing demand, margins, and efficiency gains, allowing them to beat the previous GPU outlook. He estimated about half of the comp performance was from direct controls (COGS efficiencies, pricing algorithms, customer experience) and the other half from FTC enforcement benefits.

“I would say it's evenly mixed between items we control directly, so COGS efficiencies, the GPU decrease, pricing algorithm improvements, customer experience improvements. So those items that we control directly, we think is about half of the comp performance, while the other half is really coming from what we think is the SEC enforcement benefits that we're seeing.”

asked by Daniela Haigian · answered by Enrique Mayor-Mora

1 min read 5 chapters

Detailed narrative

Strategic Pillars & Execution

CarMax's "Shifting Gears" strategy, built on four pillars—great offering, easy experience, add value, and run lean—is driving strong Q2 FY27 results. The strategy focuses on customer-centricity and operational efficiency, with initial benefits seen in improved price competitiveness and sales conversion. Management expressed confidence in building on this early momentum and achieving sustained growth.

Pricing & Customer Experience Enhancements

The company strengthened price competitiveness by driving reconditioning efficiencies and dynamically managing GPUs, passing savings to customers. AI voice technology was scaled to 100% of inbound calls, and the digital car detail page was redesigned to improve the purchase journey and sales conversion. These enhancements supported sales conversion and are expected to yield further gains.

Profitability & Capital Allocation

Profitability was boosted by material year-over-year growth in extended protection plan (EPP) unit margins and increased CarMax Auto Finance (CAF) contribution, including a $17 million gain on a nonprime securitization residual sale. The company also announced the resumption of share repurchases at a modest level in Q3 FY27, reflecting confidence in its outlook and financial flexibility, with $1.31 billion of authorization remaining.

Leadership & Organizational Changes

CarMax appointed Elizabeth Bergens as EVP, Chief Digital and Customer Officer, effective October 5, and Jeff Campbell as SVP, Strategy, in August. These new leadership roles are designed to accelerate key decisions, unify the end-to-end customer experience, and strengthen core operations by bringing together strategy, data science, AI, and pricing teams.

FTC Regulatory Impact

Enhanced FTC regulatory focus on transparent vehicle pricing, requiring fees to be included, has created a tailwind for CarMax. The company's long-standing no-haggle pricing policy now allows for clearer price comparisons, significantly improving its competitive position. This has led to a doubling of "great deals" ratings on third-party sites like cars.com for CarMax vehicles.

AI-generated summary of the company's earnings call. Not investment advice.