CarMax earnings fall but still beat expectations

Locally based firm: CarMax Inc.

Automotive retailer CarMax Inc. said its fiscal first-quarter profit fell 2.7 percent on a double-digit sales drop and increased costs at its auto-financing arm.

But the results still beat Wall Street expectations. Shares climbed 16.96 percent, or $2.22, to close at $15.31 on the New York Stock Exchange.

The Goochland County-based retailer, which operates 100 stores, said it earned $28.7 million, or 13 cents per share, in the three months that ended May 31, down from $29.6 million, or 13 cents per share, a year ago.

The latest results include a charge of 11 cents per share related to loans at its CarMax Auto Finance unit and a gain of 2 cents per share for a litigation settlement. That left adjusted earnings at 22 cents a share -- well above the 4 cents a share that analysts expected.

Sales fell 17 percent to $1.83 billion from $2.21 billion a year ago but still beat analysts' estimates of $1.72 billion.

Sales at stores open at least a year, also called same-store sales, fell 18 percent during the quarter. Total used-car unit sales dropped 13 percent, while new-vehicle unit sales fell 42 percent.

"Despite the difficult economic conditions, we are pleased to report some signs of improvement," CEO Tom Folliard said in a conference call with investors.

Folliard said while it's difficult for him to call a decline in sales an improvement, he said it was "certainly a sequential step in the right direction" compared with the fourth quarter, when the chain saw a 27 percent drop in same-store sales.

The company's auto-financing arm reported a loss of $21.6 million compared with a profit of $9.8 million in the year-ago period.

The volume of loans originated and sold by its financing arm dropped 27 percent from the year-ago period, reflecting the decline in sales and the company's decision to decrease the amount of in-house lending. Folliard said that decision did contribute to a decline in sales.

-- The Associated Press