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September 23, 2009

US: CarMax Q2 income boosted by ‘clunkers’ incentives

CarMax has reported a rise in its net sales and income for the second quarter, with increases in both used and wholesale vehicles and a boost from a the “cash-for-clunkers” programme.

Auto retail group CarMax has reported a rise in its net sales and income for the second quarter, with increases in both used and wholesale vehicle sales and a boost from the federally funded “cash-for-clunkers” programme.

Net sales and operating revenues increased 13% to US$2.08bn from $1.84bn in the second quarter of last year. Comparable store used-unit sales increased 8% for the quarter. Total used-unit sales rose 10% in the second quarter.

Net income increased to $103m, or $0.46 per share, compared with $14m, or $0.06 per share, earned in the second quarter of fiscal 2009.

 “We are pleased to report healthy increases in both used and wholesale vehicle unit sales,” said president and chief executive officerTom Folliard.

The company said that, in part, the sales growth was the result of easier year on year comparisons. However, it also reflected improving customer traffic trends and an improvement in sales execution, a statement added.

The government’s CARS, or ‘cash for clunkers’ programme resulted in a spike in showroom traffic in late July and August, Folliard said.

CAF, the company’s auto finance division, reported income of $72.1m compared with a loss of $7.1m in last year’s second quarter. In both periods, results were affected by adjustments related to loans originated in previous fiscal periods. In the second quarter of fiscal 2010, the adjustments increased CAF income by $36.2m.

“We are extremely pleased to report a record level of quarterly income, despite the continued challenging economic environment,” said Folliard. “We are especially encouraged by the breadth of factors contributing to the earnings improvement, from the strong sales execution to our continued achievement of solid gross profit per unit, and from the improved CAF income to our ability to generate solid SG&A leverage. While cash for clunkers certainly had a positive effect on traffic and sales, this was only one of many elements that drove our success this quarter.”

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