Customers purchase used cars at a CarMax dealership in Lexington, Kentucky.
Luke Sharrett | Bloomberg | Getty Images
AutoMax reported a 33% drop in first-quarter profit on Friday as lower margins on vehicles sold continued to affect the used automobile industry.
It has been a bumpy time for the used automobile trade, with profitability deteriorating in recent times while the provision of latest cars has increased.
Better offers and trade-in agreements for brand new cars also prevent potential buyers from considering used cars.
Used automobile dealers have been forced to sell cars at heavily discounted prices, a stark contrast to the pricing power that they had in the course of the pandemic when the availability of latest cars was distorted.
CarMax reported net income of $152.4 million, or 97 cents per share, for the quarter ended May 31, down from earnings of $228.3 million, or $1.44 per share, within the year-ago quarter.
According to LSEG data, analysts had expected earnings of 94 cents per share.
For the reporting quarter, total revenue amounted to $7.11 billion, falling in need of analysts’ estimates of $7.21 billion.
Used automobile sales fell 5.4% to $5.68 billion.
“Vehicle affordability challenges continued to impact our (retail) sales in the first quarter, with ongoing headwinds from widespread inflationary pressures, higher interest rates and tighter lending standards,” the corporate said in a press release.
Analysts and industry experts have said consumer concerns about automobile affordability persist and are exacerbated by the limited supply of inexpensive vehicles.
To prevent margin losses, CarMax has taken numerous cost-cutting measures in recent times, including drastic cuts in marketing and capital expenditure.
According to data from Cox Automotive, retail sales of used cars improved in May in comparison with the previous month, reaching their highest level this 12 months.
Cox said used automobile retail prices were consistently lower through the primary five months of 2024 in comparison with a 12 months ago.
CarMax shares fluctuated out and in of positive territory in premarket trading.
