F1Q Initial Reaction

Research evidence excerpt

F1Q Initial Reaction

e older vehicles, new marketing campaign, sharper pricing, and enhanced multichannel

integration/remove friction in the digital offer. All of this costs money, so productivity progress to fund the cost is a key focus. A

strained subprime consumer, competition from Carvana to franchised dealers, and execution risk inherent in the turnaround are

worth watching. More after the call at 8am.

EVR vs. the Street. The $1.31 EPS beat the Street’s $0.96/ exceeded our above consensus $1.06 estimate by ~$0.25. CAF

profit of $140mn came in line with our $139mn, but ahead of the Street’s $129mn outlook. CarMax sales operations drove

the beat with $150mn of operating income vs. our $94mn outlook. Strong CarMax Sales Ops profit reflects a smaller-than-

modeled comp decline (we had -1.5% vs. the -0.8% print) and the topline upside in part due to wholesale strength with units up

8.4% YoY ahead of investor expectations for a slight decline. Gross profit at $854mn dropped 4.4% YoY but beat our $785mn

outlook. Used Vehicle Gross Profit of $500mn was ahead of our $489mn on strong units. GPU at $4,177 was also slightly ahead

of our outlook/ the Street at $4.1k. Wholesale Gross Profit at $169mn exceeded our $148mn outlook. Other at $184mn beat our

$147mn outlook providing the largest CarMax Sales Ops tailwind. SG&A at $635mn was down 3.7% YoY vs. our $622mn estimate

(-5.7% YoY). That said, SG&A pct of sales at 7.9% was better than our 8.5% outlook. Last year SG&A rate was 8.7% so that did

improve nicely, showing efficiency gains. On the full year we are conservative relative to where the bull-case Street is likely headed:

our standing FY27 EPS is $2.45 and $2.75 for next year , both below the $2.70–3.00 / $3.30–3.50 ranges the Street is likely to

converge toward.