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CarMax reports 33% decline in Q1 profit, cites inflation

CarMax (KMX) reported a 33% decline in profit during its first quarter, citing inflation pressures and high interest rates as major headwinds to the used vehicle retailer.

The Morning Brief Hosts Brad Smith and Madison Mills report more on the bull and bear cases for the company following its earnings results.

For more expert insight and the latest market action, click here to watch this full episode of Morning Brief.

This post was written by Melanie Riehl

Video transcript

Watching shares of Car Max after reporting a 33% decline in profit during the first quarter, the shares are actually up by about 2.9%.

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The company is saying in a statement that headwinds due to quote widespread inflationary pressures, higher interest rates and tighten lending standards continued to impact sales and yes, they did.

Um Ultimately, they bought 314,000 vehicles from consumers and dealers that was actually lower.

That was down by about 8.6% versus last year's first quarter.

They said that was impacted by lower year, over year seasonal appreciation here.

Um But the retail used unit sales decreased by about 3.1%.

Comp store used unit sales also decreased by about 3.8% from the prior year.

First quarter.

It was kind of a pick what data point you want to prove your narrative print.

I felt this note from R BC kind of sums up the bull and bear case pretty well.

I think the bows according to this note are going to focus on gross profit per unit stability and continue cost discipline for the company and that the worst of the macro environment pressuring this name is going to be in the rear view mirror.

Having said that the kind of bearish view is going to be focused on the retail comp this coming from the earnings print and the car max, is it kind of remaining the market share loser here when it comes to some of the data that we got in from this print.

Having said that the analyst behind that B and Bear case that was just laid out Steven Smes from R BC.

He is saying that he still maintains his outperform rating on the stock.

But I mean, it, it's certainly been struggling here.

You can see that over the past three months is down 14% year to date down just 7% after having a little bit of a run over the March and April months there.

But interesting to see what's going to happen with Carmax moving forward.