Difficult economic conditions are leading car shoppers to look for less-expensive used vehicles, CarMax President and CEO Bill Nash said Thursday (Sept. 29) during the company’s quarterly earnings call.
CarMax’s retail used vehicle unit sales declined 6.4% year over year during the quarter ended Aug. 31, although its revenues increased 2% due to growth in average selling prices, according to the company’s Thursday earnings release.
CarMax attributed the drop in units sold to vehicle affordability challenges, widespread inflation, rising interest rates and low consumer confidence.
“We believe industry sales were also impacted by a shift in consumer spending prioritization from large purchases to smaller discretionary items,” Nash said during the call.
In response to this environment, CarMax is continuing to alter the mix of vehicles it offers by adding more lower-priced units, Nash said. For example, the company is now offering retail customers more of the older vehicles that it used to sell in the wholesale market.
At the same time, the company has been growing its retail gross profit per used unit.
“We continue to focus on striking the right balance between covering cost increases, managing margin and passing along efficiencies to consumers to support vehicle affordability,” Nash said.
The company’s efforts to acquire the vehicles it needs for resale have been helped by its online instant offer tool directed at consumers and its digital appraisal product aimed at other dealers.
“We remain focused on providing the most customer-centric experience in the industry with a leading eCommerce platform that integrates buying and selling cars with our best-in-class store experience,” Nash said.
During the quarter, 11% of the CarMax’s retail sales were made online, up from 9% during the same quarter the previous year. About 53% of its retail sales were omnichannel sales, down from 55% a year earlier. In addition, 100% of its wholesale sales were completed online, Nash said.
While the current macroeconomic factors have led to a market-wide decline in U.S. auto sales, CarMax has continued to gain market share, Nash said.
“Despite the impact of these factors on our results, we continued to grow market share,” Nash said during the call. “We also continue to make progress on the key initiatives that will further strengthen our competitive differentiation over time.”
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