Carmax Sees Used Truck, SUV Values Fall

You'd think a company selling used cars would be doing well in this economy. Give a gander to this Associated Press report:

Shares of Carmax Inc. fell 11.6 percent Wednesday in premarket trading as its first-quarter profit plummeted 55 percent on tumbling new-car sales and the fastest drop in used-vehicle values in company history.

Carmax also suspended its sales and earnings guidance for all of fiscal 2009.

In the three months ended May 31, Carmax profit fell to $29.6 million, or 13 cents per share, compared with $65.4 million, or 30 cents per share.

Analysts polled by Thomson Financial expected, on average, earnings per share of 22 cents.

Wholesale industry prices for sport utility vehicles and trucks declined nearly 25 percent during the quarter, about four times the normal depreciation expected over the period and greater than the depreciation expected over a full year, the company said.

"This is the most rapid depreciation of any vehicle segment that we have experienced in our 15 years," Chief Executive Tom Folliard said in a statement.

Sales edged up to $2.21 billion from $2.15 billion. Analysts expected revenue of $2.28 billion.

Revenue from the company's financing unit dropped to $9.8 million from $37.1 million. New vehicle sales fell to $82.1 million from $112.6 million.

Both the company's cost of sales and selling, general and administrative expenses increased.

Carmax said it was suspending previous guidance.

"As a result of the combination of the uncertain economic conditions, rising fuel and food costs and weak consumer sentiment, exacerbated by the rapid depreciation in SUVs and trucks, we are temporarily suspending guidance on comparable store sales and earnings for fiscal 2009," Folliard said.

By Dan Beyers  |  June 18, 2008; 1:14 PM ET
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Please email us to report offensive comments.

SUV's and other gas guzzlers will not disappear via re-sales and depreciation. They need to be taken to the crusher immediately and replaced with reasonable alternatives.

Posted by: Bill Monroe | June 18, 2008 3:15 PM

Who cares about SUV's, glad they will be extinct soon.

The big three and the marketing blunder, hope they all go under.

So much for foresight, let's sell a wasteful, ugly monstrosity for 20 years.


Posted by: Betsy | June 18, 2008 8:01 PM

Did you read their F1Q09 earnings call transcript that came out yesterday? Thomas Folliard's poor attempt at spin just convinced me this company is facing some a real threat to its survival. You should read his comments about how Carmax's superior business model will save the day! If they don't come up with something better than that, they are in serious trouble. You can read the entire transcript here:

Posted by: Barry | June 19, 2008 5:28 AM

I care about SUVs Betsy! Isn't that a cow name? Anyway, I have a large family with crazy winter conditions that require 4WD. Please explain to me how are my going to put my large family (teenagers) in a Prius when we go see grandma? And you hope the carmakers go under, losing thousands of jobs in our economy? You must be a real cow writing these comments, live in a farm, and eat grass! I didn't know cows could blog! MOO.....

Posted by: Jrosado | June 21, 2008 9:32 AM

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