CarMax CEO Bill Nash warned Thursday that consumers are struggling with affordability as the used car dealer reported its fiscal 2023 second-quarter financial results.
The company sold a total of 216,939 retail used vehicle units during its second quarter, a 6.4% drop from the same period in the prior year. CarMax’s average retail selling price increased 9.6% compared to last year’s second quarter, with its gross profit per retail used unit going up nearly $100 to $2,282 “despite steep market depreciation,” the company said in a press release. Meanwhile, comparable store used unit sales went down by 8.3%.
“Macro factors, including vehicle affordability, that stem from persistent and broad inflation, climbing interest rates and low consumer confidence, all led to a marketwide decline in used auto sales,” Nash said during the used car dealer’s earnings call. “In addition, wholesale values were affected by steep depreciation in the quarter.”
Inflation, as measured by the consumer price index, rose by 8.3% in August from the prior year and 0.1% from the past month, according to data from the U.S. Department of Labor. Though the prices of used cars and trucks dropped by 0.4% on a monthly basis, they are roughly 7.8% higher than they were in August 2021.
TYPICAL MONTHLY PAYMENT FOR A NEW VEHICLE HITS RECORD $743
The Federal Reserve has been working to wrestle inflation closer to its 2% goal, approving a third back-to-back 75-basis point interest rate hike earlier in the month.
During the earnings call, Nash said that CarMax “continued to grow market share” despite the impact of inflation, interest rate hikes and other factors.
CONSUMER CONFIDENCE TAKES INFLATION HIT
CarMax posted net revenues of $8.1 billion for the second quarter. However, its quarterly net earnings narrowed from $285.3 million in the same period last year to $125.9 million.
“We believe industry sales were also impacted by a shift in consumer spending prioritization from larger purchases to smaller discretionary items,” Nash also said. “In response to the current environment and consumer demand, we have continued to offer a higher mix of lower-priced vehicles.”
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