Carmax Profit Tumbles, Suspends Earnings Forecast
Carmax, the largest U.S. retailer of used cars, said Wednesday quarterly profit fell by 55 percent as a slowing economy and falling resale values for fuel-hungry light trucks and sports utility vehicles brought lower than expected sales.
The company suspended its earnings forecast for its fiscal year, citing tough economic conditions, and its shares tumbled about 12 percent in premarket trading.
"For the first time in more than two years, we experienced a modest decline in customer traffic in our stores," said Chief Executive Tom Folliard in a statement.
The U.S. auto business has been hammered by a slowing economy and tighter consumer credit, as well as slumping demand for trucks and SUVs because of record high gasoline prices.
The Richmond, Virginia-based company said profit for its fiscal first quarter, ended May 31, fell to $29.6 million, or 13 cents per share, from $65.4 million, or 30 cents a share, a year earlier.
Net revenue rose 2.9 percent to $2.21 billion.
"If current trends persist, results for the full year could be significantly below the bottom of our original earnings guidance range," Folliard said, noting that sales activity has slowed further since the U.S. Memorial Day holiday on May 26.
The company had previously called for full-year profit of 78 cents to 94 cents per share. The bottom of that range would represent a 6 percent drop in profit from last year.
CarMax shares fell to $16.20 in premarket trade.