Used car dealership chain CarMax 4Q profit rises

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Associated Press

Posted on April 10, 2013 at 1:01 PM

RICHMOND, Va. (AP) — Used car dealership chain CarMax Inc. said Wednesday its fourth-quarter profit increased 13 percent as improved inventory and financing offers drove up sales.

The Richmond, Va., company, which runs more than 115 stores in 59 markets that mainly sell used cars and trucks, reported earnings of $107.2 million, or 46 cents per share, for the three-month period ended Feb. 28, compared with from $95 million, or 41 cents per share, a year ago.

Revenue grew 13 percent to $2.83 billion.

Analysts polled by FactSet expected earnings of 45 cents per share on revenue of $2.72 billion. Its shares rose $1.34, or 3.2 percent, to $43.02 in morning trading Wednesday.

Sales at stores open at least one year rose 6 percent. This is a closely-watched indicator of a retailer's financial performance as it strips away the impact of recently opened or closed stores.

"We feel pretty good about the way we're executing our business right now," CEO Tom Folliard said in a conference call with investors.

Used vehicle unit sales rose 12 percent as the company's average selling price rose 4 percent to $19,287. Wholesale vehicle unit sales increased 7 percent during the quarter. New vehicle unit sales, which make up a smaller part of CarMax's business, fell 1.5 percent. Other revenue, which includes fees it receives from third-party lenders its customers use, fell nearly 4 percent.

Its total gross profit — its profit after reconditioning and other costs — grew 9 percent during the quarter. Gross profit per used vehicle sold was essentially flat at $2,141 and wholesale gross profit per vehicle rose 9 percent at $985.

Income from CarMax's auto financing arm rose 15 percent to $76 million in the quarter as it financed more of its customers' vehicles.

Expenses increased 9 percent to $265.5 million as the company spent more to support its store growth and spent more on advertising.

The company said it opened 10 stores in both new and existing markets during the fiscal year ending Feb. 28, including two in the fourth quarter. It plans to open about a dozen new stores in the next year.

CarMax has been focused on lowering expenses, and improving traffic, execution and gross margins to position it for future growth. For example, the company has improved its sale and appraisal rates and lowered the costs for reconditioning vehicles.

The company also said Wednesday that it repurchased 4 million shares of common stock for $151.7 million during the quarter.

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Michael Felberbaum can be reached at http://www.twitter.com/MLFelberbaum .

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