CarMax (KMX) Stock Tumbles 6.8% as Goodwill Writedown Overshadows Revenue Beat

Key Highlights

• CarMax reported a Q4 net loss of $120.7 million, equivalent to 85 cents per diluted share, primarily due to a $141.3 million goodwill impairment.
• Shares declined 6.8% during premarket trading Tuesday morning.
• On an adjusted basis, earnings per share reached $0.34, surpassing analyst expectations of $0.18; quarterly revenue of $5.95 billion exceeded the $5.65 billion consensus.
• Gross profit per retail used vehicle contracted to $2,115 from $2,322 year-over-year; wholesale unit profitability declined to $940 from $1,045.
• The company intends to launch four new retail locations and four reconditioning/auction centers during fiscal 2027, allocating approximately $400 million in capital expenditures.

Shares of CarMax (KMX) tumbled 6.8% in premarket activity Tuesday following the used-car retailer’s announcement of a fourth-quarter net loss, largely attributed to a $141.3 million goodwill impairment.

The Richmond, Virginia-headquartered retailer reported a net loss of $120.7 million, translating to 85 cents per share, during the most recent quarter. This marks a sharp reversal from the year-ago period when the company generated a profit of $89.9 million, or 58 cents per share.

However, excluding the goodwill impairment, the results paint a more positive picture. CarMax delivered adjusted earnings of 34 cents per share — nearly double the Wall Street consensus estimate of 18 cents.

CarMax, Inc., KMX

Quarterly revenue totaled $5.95 billion, representing a modest 1% decline from the prior year but comfortably exceeding analyst projections of $5.65 billion.

The goodwill writedown came as little shock to market observers. CarMax attributed the charge to a significant decline in its market capitalization, underwhelming financial results throughout fiscal 2026, and reduced long-term growth projections.

Profitability Per Unit Continues Decline

Per-vehicle margins remained under significant pressure throughout the quarter. Retail gross profit per used vehicle slipped to $2,115, down from $2,322 in the corresponding quarter last year. Meanwhile, wholesale gross profit per unit fell to $940, compared to $1,045 a year earlier.

To stimulate inventory turnover, CarMax implemented price reductions across its lots. The strategy yielded some results — wholesale unit volume increased 3% to 122,781 vehicles. However, average wholesale selling prices decreased by approximately $270 per unit, offsetting much of the volume benefit.

Retail used vehicle unit sales edged down 0.8% year-over-year to 181,188 units. Comparable store sales registered a 1.9% decline. Average retail selling prices also softened, falling roughly $110 per vehicle.

Total combined retail and wholesale volume remained essentially stagnant, rising just 0.7% to 303,969 units.

Consumer sentiment has presented additional headwinds. Gasoline prices lingering around $4 per gallon have dampened purchasing appetite. This dynamic has redirected some consumers toward electric and hybrid vehicles, reshaping demand dynamics within the pre-owned automotive market.

Leadership Transition Brings Strategic Pivot

Newly appointed President and CEO Keith Barr used his inaugural earnings call to outline a more aggressive operational approach.

“We are moving with urgency to improve execution, drive efficiencies, and sharpen our customer offering,” Barr stated. He emphasized that competitive pricing and expanded vehicle selection would serve as primary mechanisms to recapture market share.

Barr articulated a vision to position CarMax as “the obvious choice for customers” by delivering superior pricing, maintaining robust inventory levels, and enhancing the overall customer journey.

Looking toward fiscal 2027, CarMax announced plans to establish four new retail stores alongside four additional reconditioning and auction facilities. The company anticipates capital spending of approximately $400 million to support this expansion.

Full-year quarterly revenue declined 1% to $5.95 billion.

Adjusted earnings per share for the complete fiscal year contracted to 34 cents from 64 cents in the previous year, underscoring the persistent margin challenges affecting the business.