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Used car dealership chain CarMax sees 2Q profit jump 10 pct despite slowing same-store sales

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RICHMOND, Virginia — Used car dealership chain CarMax Inc.'s profit jumped 10 percent in its fiscal second-quarter despite slowing sales at stores open at least one year.

Its earnings missed Wall Street expectations, and the company's shares fell more than 7 percent in morning trading Tuesday.

The Richmond, Virginia-based company said it earned $154.5 million, or 70 cents per share, for the period ended Aug. 31. That's up from $140.3 million, or 62 cents per share, a year ago.

Excluding proceeds from a legal settlement related to certain Toyota vehicles, CarMax earned 64 cents per share. Analysts surveyed by Zacks Investment Research expected earnings of 67 cents per share.

CarMax, which runs about 140 stores that mainly sell used cars and trucks, said revenue grew nearly 11 percent to $3.6 billion. Analysts expected revenue of $3.55 billion.

Sales at stores open at least one year rose less than 1 percent. That is a key metric because it strips out the volatility of newly opened and closed locations.

Used vehicle unit sales rose nearly more than 6 percent as the company's average selling price rose more than 4 percent to $20,215. Wholesale vehicle unit sales increased more than 7 percent during the quarter. New vehicle unit sales, which make up a smaller part of CarMax's business, increased 18 percent. Other revenue, which includes fees it receives from third-party lenders its customers use, increased nearly 11 percent.

Income from the company's auto financing arm rose nearly 10 percent to $92.6 million in the quarter as it financed more of its customers' vehicles.

Gross profit — its profit after reconditioning and other costs — grew 6.6 percent during the quarter. Gross profit per used vehicle sold was flat at $2,173 and wholesale gross profit per vehicle rose about 3 percent to $874.

CarMax opened four stores during the second quarter. It plans to open 13 stores this fiscal year and between 10 and 15 in each of the following two fiscal years.

Shares fell $3.97, or 7.5 percent, to $48.84 in morning trading Tuesday.

CarMax shares have increased 13 percent since the beginning of the year, while the Standard & Poor's 500 index has increased roughly 8 percent. The stock has climbed almost 4 percent in the last 12 months.


Michael Felberbaum can be reached at http://www.twitter.com/MLFelberbaum .

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