The sellers were clearly in the driver’s seat today as CarMax (NYSE:KMX) stock lost more than 20% of its value this morning. The company reported its results for fiscal 2023’s second quarter, and CarMax’s investors were definitely disappointed. Most likely, elevated car prices contributed to the company’s revenue and profit misses.
CarMax is a platform where people can purchase used vehicles online. This might sound like a high-conviction business during a time when e-commerce dominates the retail landscape. However, inflation has apparently put a damper on buying activity in 2022, and this problem is reflected in CarMax’s quarterly data.
For one thing, CarMax’s total retail used units sold fell 6.4% year-over-year (YOY). Also, the company’s selling, general and administrative expenses surged 16% YOY to $666 million — again, inflation is rearing its ugly head.
Turning to the top line, CarMax generated $8.1 billion in quarterly revenue, missing analysts’ expectation of $8.5 billion. The real kicker, however, was that CarMax only reported quarterly earnings per share of 79 cents. This result fell far short of Wall Street’s consensus estimate of $1.39 per share.
What’s Happening with KMX Stock?
By 10:30 a.m. Eastern, KMX stock was down more than 20% for the day. The shares fell into the $60s as nearly 7 million CarMax shares traded hands during the first hour of the day.
Understandably, the company went into damage control mode by accentuating the positive aspects of the quarterly data. For example, CarMax pointed out its quarterly net revenue increased 2% YOY.
Moreover, CarMax president and CEO Bill Nash emphasized his company’s “ongoing progress in strengthening and expanding our omnichannel experience.” Given CarMax’s dismal quarterly performance, however, the company had to acknowledge its challenges.
These challenges include “vehicle affordability challenges that stem from widespread inflationary pressures.” There are also “climbing interest rates and low consumer confidence” to consider.
So, KMX stock traders should consider the impact of sticky inflation and interest rate hikes before buying the dip. Otherwise, they might be in for a bumpy, volatile ride.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
