KMX - Earnings call transcript Q4 2020

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Operator

Good morning. My name is Carol and I will be your conference operator today. At this time, I would like to welcome everyone to the CarMax Fiscal 2020 Fourth Quarter Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session.

to Investor call Relations. like Frole, to now President, Vice would turn over the Stacy I

Stacy Frole

Thank Carol. you,

Good morning. am and Thank Tom and fourth Bill quarter Enrique you our Reedy, for joining year-end Nash, Senior President conference our our earnings Mayor-Mora, Executive call. of and our CFO. I President here Vice with and today CEO, fiscal Finance; XXXX President Vice

These are could involve XXXX. risks make of materially our business are actual the Act you, that assumptions that remind Securities uncertainties statements differ to statements we expectations. plans, forward-looking and me cause management's the and current Private future today our knowledge Harbor Let company's and Safe performance events results prospects financial statements on the future about provisions pursuant the to based regarding of from Reform Litigation

In disclaims company statements, providing update any intent forward-looking and them. projections obligation to the other or

factors see the report affect SEC. department information could these call, Relations any on additional Should year you ended please extension to fiscal XXX-XXX-XXXX, Form important on XXXX. filed February free after our XX, contact have expectations, with For please the questions XXXX at Investor annual the that XX-K company's follow-up the feel for

let and Lastly, only Bill? follow-ups. you the for queue more one advance getting asking thank me in question for in back

Bill Nash

Thank you, Stacy. Good morning, everyone. And thanks for joining us.

results. company's quarter full-year delivered in vehicle sales GPUs transformation used and record and history. attractive undergoing we read you we while the both release our largest in our for morning, As and did our maintaining fourth this earnings EPS this And

an vehicles to market comp share to XXXX, X calendar For our X.X%. grew X.X%, was which of also XX-year-old increase we of

have. any we unprecedented in, answer this take morning's current given evolving to and this this to currently going and the on may are time release. earnings extremely the not within we're time proud of we questions environment Instead, like included you repeat to performance, would focus are commentary While we rapidly the that

First have to foremost, a all the our of which battling also and our those basis. day-to-day want this on with thank are by communities, affected I been who thoughts are coronavirus. pandemic

measures the health Over weeks, risk of customers our the past place communities. virus spread of put are to safety the in and and exposure in of our further very The we've to reduce communities and our important associates, us. few significant

are government agencies, the implementation We health social and enhanced closing guidelines, stores. of of localities, cleaning mandates following the in and officials public distancing many measures, our including

also job remotely offices. associates mobilizing critical done team to few a Our great work remaining only from home, in in with a our has corporate our locations at

During this who challenging to time, we quarantined. living store for closings remain been to days up impacted associates providing our values. to and benefits current have by XX committed or required to We're be pay our

beyond to for In go XX assessing those addition, are options we days.

communities to continue also our to coronavirus. We their the back national our by supporting partners to in give response

business, of our currently our half running approximately with closed limited Regarding or operations. stores are

as in dynamic We place, new store and closings and situation have plans scenarios openings with is central response multiple for a team a implementing daily. this developing

our our provided time, according keep will monitor constantly also needs possible we Throughout our as as locations to operate is support open the essential this the each customers, associates. goal Our of long to and income requirements locality. to to providing while by

available in omnichannel of to our approximately was experience customers. release, our noted As XX% news our

the of current customers. pivoting self-progression quickly possible relevant needs and online such parts and of experience, and we're pickup the the markets, omni remaining implementing given broadly our curbside as express or as our as For most

experienced seen. of While a CarMax, was March, practice, conditions. had not ever which month the insights I've March we current into providing visibility like all volatile at most my never I've our sales month we're in usual allow into to years In

of robust our coronavirus the have has situation beginning The positive escalated comps week March. into then, the and first through momentum US experienced month rapidly this the sales of the carried significantly. with within dropped the past Since year

operations Over are the demand past limited or consumer progressively has few weeks, deteriorated. approximately half and stores have of under our running closed

approximately closed due of almost vehicle place our are to taking of are online. half auction wholesale, state For locations and one-third now sales wholesale mandates, our

have quickly weeks. Advancements be enabled online in technology online move all us the we an sales to and coming sales moving will to platform, in

our a inventory our of both GPUs, and look to for For we light anticipate pressure the as current of period environment. levels wholesale we retail in time right-size

to demand are is and quantify of which duration the large size valuations. the the largely of changing, impact on this At store unable how time, consumer underlying and we're constantly depends closures, fully the as changes it the

and We their cars can. we largest US, are the the to open that our is where of so who it need that we in used important seller want customers sell cars keep possible, appraisal believe or buyer lanes and

the this to in time continue at will offering right We customers and algorithms right leverage to buyers dynamic are the our our proprietary ensure price we professional environment.

focus in a logistics we emphasize is advantage. store national I As competitive our sophisticated a network our footprint huge business managing diversified on with powerful want inventory, to model,

quickly times the out experience markets, In our where addition, efficiently and and stores are we we have of associates know move auctions inventory our been we cars need before systems through closing. as strength instrumental and challenging are of to and management of

financial culture, apart, that We've us associates, operational to set us cycles. our market said allowing that stability excellence all in share it's expand economic and always our

taking this the steps from us current proactive and even We environment believe will stronger the emerge help as withstand an company. crisis today we're

our as to our followed be business I'd to he'll to who relates over the to and CAF Enrique will Now, like speak efforts by will financial call stability. turn it who Tom, continuity discuss

Tom Reedy

unprecedented. years in team Those The circumstances nation and situation similar Thanks, followed over is this who with morning, capital Bill. stores our the dealt has Good in that everybody. markets. the the have us know

our customers CAF on been and has Recent our associates, group consumer focus channels. at finance our funding and our

demands while in to our job of customers. remotely, an have our done excellent associates increasing As earlier, mobilizing work mentioned Bill the to our teams responding

work the few are to at be in distancing guidelines whose emphasized For requires CAF. social them office, the

In our help. customers. environment, is During endeavoring these some are do need understand for this uncertain we to may times, we right customers what

have in of during we for place CAF times, enhancing customers difficult long-term will that the We while portfolio. at variety collectability measures our support the a believe

for repossessions, includes March April providing and late waiving suspending payment upon This fee and request. available additional when loan extensions

the as As origination our and decreasing slowed. volume anticipate, closed would one strong demand tracked during sales performance with starting then of and out March, stores month

in too curtailed mix. in early tier demographics credit it to made identify point have we is to lending, but standards customer and this changes our X as At core trends any lending no in-house have time, our specific

it closely. we're However, watching

to the becomes did greater the delinquencies on an extensions. half demand we March, available. second we're in But increase surprisingly, of point, payment performance. Not portfolio in we'll impact as not to able for experience this future it analyze continue data and predict At the a

will early In quality it's our overall but some balance needs the determine to experience impact while either of as Obviously, continue we on portfolio. much well, expect we'd case, customers, to the similarly, the too maintaining unfavorable loss quarter.

current last companies. our The the as referred applying As from on to we commonly CARES as effective some new week March discussed us standards is CECL call, by Act standard, X. credit loss accounting Congress CECL, passed for expected temporary of for provides last relief the

if Given our defer it whether just elect the evaluating and adoption we're current to the we this would adopt we're standard. to environment, of eligible for relief

XX-K available will in filed information be month. this Additional later our

the We channel. intend to expect a have options their CarMax to indicated vehicles Lending our supporting our through variety finance purchases lenders. customers will continue partner they to of and continue have CAF partners

business As long-term in mentioned years, because I've partners many told but over they allocation prioritize capital decisions, mostly our origination historically channel, times on performance experience relationships. our have superior they focus to the due CarMax from our also us superior

sales FY of an $X.X environment. for could particularly our warehouse in unused months, with support ended the CAF XXXX billion We on several amount that activity capacity facilities, current

disrupted, And feds public see the is liquidity in including while markets, ABS the encouraging. bringing currently as TALF to bolster market the actions back credit recent we

the an In of remain extended employed to Recession assessing similar should period actively solutions the time. the alternatives, any we creative market we're for disrupted event, ABS during Great

have are changing through this fortunate environment. finance ever help have us in to have We to partners past. We crises expertise, and believe that and challenging work the navigated together we teams the resources

over Enrique turn strength our and flexibility. discuss call I'll financial to Now, the to

Enrique Mayor-Mora

good and diversity morning, strength competitive on advantage our and model, Thanks, our of everyone. Tom. CarMax's in And lies ability associates, focus our to the sheet. strong our of challenging business times combination balance through manage

distance when XX%. positions capital and us ourselves from should us This economy our at the end At of debt of to our further year, targeted to competitors. of end our lower range the ratio the for well was adjusted position XX% the rebounds

have flexibility that highly being current us Not with challenging is in to the levered environment. beneficial provides

us maintain on and liquidity solid focused We've a potentially profile. capital in flexibility been structure, environments. our maintaining this done always We have macroeconomic help with difficult from sheet to balance shield strong a to

Let me where current end give stood liquidity you snapshot as a at we March. of the to

had of and capacity of facility, million hand. billion $XXX revolving more of March unused our $XXX than of $X.X More million we on and XX, As cash equivalents cash inventory. credit approximately on than

locations We also country, net own the billion. $X.X with across more book in in a XXX buildings the value of of than excess and our real estate

in term $XXX financing From $X.X notes credit consisting billion million long-term loans, our billion leasebacks we facility, approximately approximately on $X.X debt perspective, on obligations, largely a approximately senior to related $XXX sale debt select of and outstanding currently and stores. million have of revolving to of

have to maturities the in as earliest important no is that It's note also near-term we XXXX.

see, financial As solid we a in you position. are can

for term environment. sales reduced However, the limited shorter it's in us the in for the into costs also environment, levels important to current the and manage future visibility

decisions flows to challenging our We've business in past of shown to make long-term the and ability protect in ensure to cash health prudent the times. the even an

with that strong Accordingly, best to approach us carrying albeit measures to already steps health. We on unprecedented, position situation to the begun preserve financial emerge have in same specific we current, cash the taking intend will

levels, same capture flexibility, we few in the rebound when the in time, we're on aligning past can inventory operating pausing of capital we building sales the ensuring state the At weeks, and to been that the expenditures, most arrives. reducing it business. expenses Over have sufficient so we're

Prior year stores similar new number was to XXXX. in open year our stores to the coronavirus, XX fiscal of fiscal intent and XXXX it during a

store on until and paused situation stabilizes. our have We activity remodels expansion

dictates program. returning that In share halt addition, the environment we our current shareholders, repurchase to committed remain to while we our capital

I'll now back Bill. the turn over call to

Bill Nash

you, Enrique. Thank you, Thank Tom.

is and quickly, sometimes heard and health track team ensure the and by of model times conditions near has today, taking we decision of you changing believe numerous ensure our be consumer in measures recession and business diverse us prudent favorable But are strong the long long-term as and rebound. will will It withstand hour the locality. are but the the difficult current record the As term, to say the a we situation financially appropriate by and business. be in we economy mentioned, dynamic making to Enrique the a when tested position we

into our undergoing maintaining expanding on market our we shouldn't FY the a rock We vehicle transformation addition, FY crisis we building great produced to overlook that history. this XXXX we GPUs, did and future. and while came this year forward solid attractive sales success we with foundation. share was In and in XXXX EPS largest record the look in and the in a

be we'll questions. happy to Now, your take

Operator

Instructions]. [Operator you. Thank

Our go ahead. question Capital Ciccarelli Please Scot from today first Markets. comes RBC from

Scot Ciccarelli

course, early Good morning, and ticket much paralysis in of is being well this world the I I March. understands on dealing in think that And what a point. doing at broad big purchases. down top your Bill, pretty for pretty think Richmond changed pretty would everyone closed of there consumer with significantly half stores guys. Hope you're everyone's healthy

a last you provide for with Thanks. more context would might be hoping on able being you've few So, be to weeks, I that color think helpful little over probably I the what as quantification said, seen was that investors. bit

Bill Nash

you, Yeah, Scot, give the color let the store question. on all closures. for you first me a Thank Sure. little of

stores about that So, hour, situation currently it have very it's half currently we the because closed fluid on I and are like a approximately completely I are by closed. – – say changes mentioned, XX limited operations

another have are operations. XX We so modified approximately or that

think think operations, when that, you about modified so, it's And primarily appointment about only.

consumer So, location. at just show can't the up the

this by set All distance of all which guidelines, each of locality. are the of rest social impacted the locations are by because

more the time. customers you in for at can't point showroom So, XX in some have than stores, any in example,

selling of on Most opened little a weeks. the sales, the so the on adding more as of stores sales stores been time, far color year. for of XX% last are substantially As what the last off than less during all open last weeks, over XX% or that bit the they that year-over-year are two have two sold

has period, don't XX% think, during to surprise of time that anyone pretty at XX% Now, a I told home. because the that think US I should much be to to been stay

down. that, given has demand So, progressively going consumer been

hopefully, adds color bit. a little So, that

Scot Ciccarelli

just like like a to but Yeah, you profit you're you that's up GPUs, selling really is per because spread? that cash? helpful. a comment? pressure And on unit, clarify we can cost talking the below I the brought cost couple more Thanks. generate making something and still just even Are this need dollars, positive hundred inventory or gross liquidate Or

Bill Nash

unprecedented. Yeah, of two is Scot. think, back It's albeit had it's weeks. we go too we're during to hundred I about that This a really Great period, dollars. last the different very kind really Recession, of a kind because early – If the talking I couple

sure to under it's So, really we'll I'm at this come than tell you pressure. other some point, hard

Scot Ciccarelli

guys. a luck. Thanks Good it. lot, Got

Bill Nash

Scot. Thanks,

Operator

comes ahead. Please Armintas Our next Morgan from question go Sinkevicius from Stanley.

Armintas Sinkevicius

for the Great. question. taking you Thank

about be in thinking XXXX, magnitude fiscal a I pre-coronavirus and albeit were omnichannel XXXX SG&A year-over-year we than the lower up world think post-coronavirus, the expansion. As because fiscal of would

try them if us could capital think you expansion It the because expansion omnichannel? That of Now, And to down store SG&A you sometimes aren't push coming stores. expenditures should that the other openings. they we mentioned would on sense as be makes customers about How if to see into thinking in pace, with impact pausing the well. fit, to your it the makes sense and help you've through helpful. slowed ways paused, be accelerated, and but reach

Bill Nash

assuming sure. just be if do coming to were X% the on that, some to we actually talk XXXX, need had FY come what initiatives. a I we we weren't doing only Look, into other we than had comps. doing XXXX, And if into we little think said frank, continue as our like we And past, Okay, pre-coronavirus, bit were we FY focus FYI better in we could other XXXX, planning a omnichannel, on initiatives. felt some we that X%

to leverage have would we're a X% we for X% different So, comp right now. still a world in Obviously, probably taken FY XXXX. to

omnichannel to As some the we're on with you of I on Enrique the expansion. that agree continue going forward doing. about, that. talked push We're things to

environment As going explain how doing things might to first. to I bit on the and I are focus think what some in said, rollout And a we're going help change. that been of our relevant it's little is most this how we've

process So, We've We management been the very historically, train then, omnichannel, when rolling experience out we support can managers, our as We we've we to been process. go systematic ramp start CECs, it's associates. so our And it's and systematic. change we beforehand. weeks the got a centers, customer in, ways. rollout generally six very train up they that those a the continue great

to less self-progression. first which we're possible get, the window to going that of as go obviously Obviously, on make but why can have at the stores so as is sure in-store all, training training, we the we more customer focus out this is the volume, point, quickly

it pickup hub a to where ahead pickup, about that's really They the they customer So, the as to to and want there car now everything for test can which used online, really all previously express in of do the curbside and can as We're what the we're few allows as they they they the can come that or to the remained. for waiting literally they that it well do swing car never drive, to their documents as transaction come store. much pickup, touchless. the any we whole time, online come, by can sign store, curbside express refer it can them, be in could think but online because have cases, calling the in as calling customer take

We you've to are be in support. that sure the rolled we'll want continue that and to sure interim, stores But up. make are get to we up, that out doing the until then can get that doing we ramp some what ramp going everywhere CECs the CECs got make

get everyone we'll there. So,

just finalize this into rollout. to a way year Our was it goal in the coming different We're approaching

Armintas Sinkevicius

Okay.

of So, your of the much pace you're and so rollout the not changing targets. sort end

changing you're it approaching how process, sounds the You're like. more

Bill Nash

say, to as putting to these features I'd going we're the We we or that in be have week next out curbside pace of the want all quickly possible. changing two are as pickup within locations our so.

really ago. we're So, going to the pleased I'm whole some we both pushing are But roll to this the the things. that years experienced with of fact and we omni. some investment in on several started omni these technology continue pace

these volume we a an having make going reliable them And be the they think daily that to see the really low, want different and customers experience down situation, and feel we current reasons need safe transacting I transportation variety to they it's for we us. albeit a for basis alternatives given of with customers, is in important. that on sure give

Armintas Sinkevicius

it. Much appreciated. Got

Bill Nash

you. Thank

Operator

comes ahead. William Our go Sharon from Please next from Zackfia Blair. question

Sharon Zackfia

good on much get do lived what market. point, before, ago currently this how you how morning. to having you at guess, liquidity and in sales you're this versus XXXX, what And would compare I'm through more XXXX contrast I asset-backed think you're or XX Obviously, Hi, have? seeing XX hoping and some down. color you are the seeing years

additional of how extends of your runway. of some your But kind to having before that long current funding? on can rate tap So, based you kind of go sales, sort

Enrique Mayor-Mora

Yeah. Hey, Sharon.

the I the reduced lining need could [indiscernible] in pace I order capital how mentioned much if my at guess you keep I on we in sales think As funding silver – is, remarks, prepared it CAF. to call

runway I of type funding. need think months to access we we believe there mentioned, of I additional before as And so, some several there's

it's action taken market. has think around. time than disrupted. asked that do government that time said, the much last you about the I Now, quicker this Currently, ABS

for If time, a banks fund all couple lending during of year TALF XXXX, then to were you potentially remember, of that before the a and locked public transactions we to from year. deals. out through XXXX with and the and market we originations for in partners blocked, ABS And did first TALF were CAF we cobble over together able XXXX kicked

we've been same to in fingertips our So, at tool we're I interest and We'll here We're we recession. draw things feel during this type But will got on markets. we like how every it's this. before. we've that. that spectrum. the compare credit being our The hard doesn't it to confident across provide the Recession think really able keep But come on plays for the hearing all working those during activities. did activity of – of us good very at looking all I'm But to ABS to did to use that. to continue the team the going. is conclusions Hopefully, Great about customers, funding I

Bill Nash

Thank you, Sharon.

Operator

comes ahead. question from Please next go Oppenheimer. Our Nagel Brian from

Brian Nagel

to Good morning everyone.

do hope And I all well. all to very before off, nice congratulate this First quarter mess you're fourth on also, a started. want I

got into them of shove one. to So, questions. I've I want couple a

Okay.

to try cars? have I'll a first to – of it to there, you regard potential should them regard sales I inventory may function at this more take this actions quicker a how about – inventory. a these have cars is flow ask So, Bill, there think you taking the is, accounting? to dampened I to Or So, the as The with it in sure question those more environment, we and of you just correctly, environment? move either valuing off, talked in is to look very reprice is of of revaluing this your or you're make function about some the with

if this And the as and Tom mentioned do and a CAF less had, then, more look I side follow-up of you've securitization so we been much securitization now terms. some right on normal to for has would could is so prior you at you right potentially questions, this favorable second now the as that the guess question, have the at a CarMax securitization? market what disrupted, is a skipped And Thanks. so far

Bill Nash

Brian. Hi,

the So, feels team the recognition. that here fourth quarter. fourth appreciate was all, I but ago first do given a I you, you comments the happened, that's thank for since tell everything of on the year the like quarter

we're sure As appropriately I point, we accounting sure that moving at far at as versus about this valuing point. them priced have it's more making Brian, this to inventory, cars the think make that

Our competitive of huge they're top can are We priced, how auctions advantage. are on kind being a things stay what of for. going

know, of to we are some our we replace always make inventory, stores in you on can But it our cheaper now move So, we with keep right sure so vehicles. mind, to as try lockdown. continue

access And sitting so, inventory to, we we stores that have can't that's changing even although daily. some some get in

that right more it's So, about making get moving price we sure the and it.

on want you the talk ABS? to And then,

Tom Reedy

in cadence I But the funding runway do we're amount can likely Yeah. there. market several And Brian, how the we with have or past, drop have you available week open number originated deal look we've markets think be can facilities. got of if of us our probably you make good not the close now. keeping that to would market, as we up, a to month, mentioned, at keep them. there do something the are to weeks a we've current expected in customers, from eye with we next to in alternatives sure deal a credit the be we coming of when that on and And two. the Obviously, sometime a I this

Bill Nash

Hey, Brian.

level. keep mind, we that right keep and not and other also on additional to we're the cash just but own because that the raw on in just But so all in. getting inventory, that's second, in the flow number for the process, all think flowing I down, comes only inventory, get just focused work it back to not going a thing, inventory overall the to inventory really saleable,

an that's important So, I to think remember piece as well.

Brian Nagel

Thanks, color. all guys. the Appreciate

Bill Nash

Thank you.

Operator

from comes Bank America. Please Murphy John question go next ahead. from Our of

John Murphy

you for disclosure. all helpful And hear to actually good very It's really guys. It's the from thank you morning, helpful. very guys. Good

as of break think and much question how is ABS to falling we of be understanding powerful. sounds about sort to it's the because and market a going your logjam it very just going how TALF the like potentially X.X work Just that will

would And do when follow-up the importantly, then, but the think time of to is, on the that you imagine pool? might existing for those to the How And that existing out inside how trigger work waivers have the monthly defaults, work? you are because that something pools just create skipping in sort waivers And mechanically does getting ABS that I ahead there does consumers you? of pools CAF, payments? any issues payments for about

Bill Nash

you. of best. my hit I'll both Okay, those try for I'll

back far great a Now, XXXX for That we're are hoping that deal as comes long time. a, free as was been not for investors a that TALF, it that's tool that up had I'm up that markets what to seized It's a – great enough put to. hopeful frankly, capital. in interested

we'd You to be similar was rolled all yet, expect details to very in but can XXXX. how know it works. at the don't what We out look

is but it for that the Like liquidity, back we're in create process remain go both we not But easy issuers. that an was a up, don't locked extent need a remedy the I does something that to cumbersome there. it markets So, transaction. was definitely said, and XXXX. it It's hopeful investors to for

as to. embrace a that alternatives other can we if we need have bridge We

know, you And deals the As they're receivable. on cash as flows they various the pay the and the pools of structured activity with as pools they're tools and extensions, are – non-recourse have down the receivables off. paid far really based – CAF's various those don't

they extent the actual are the on with the of is going the we extensions, amortization There's amortization. that have you're that that what the pay means structured, down schedule loans. to So, delay But to that lockstep deal. in pools debt have so go no a the

structured we they're So, perspective their off that of very obviously, own got capital the of they're it on on them. And and from course there. in flows we're come the stand play the income, but maximize initial intent represents of coming the out making that CAF invested public because residual We've out cash to as deals, sure in.

John Murphy

at the triggers period any no But we at the end there time have if of waiting the residual to cash be of nothing could don't defaults out to risk payments a for as collect we you that or save or earlier, our them. flow to are I extent is there's initially come whatsoever perform. So, we'd intended. The risk all. do potentially there's and of that have pools pocket reputational that mentioned it's if some don't or But risk day non-recourse

step Everyone paid Now, in this the little think including be us. if get start ABS the you not back we reputational the fail. CarMax deals person boat, that Great only And got risk, Recession, is a didn't significant remember because bit kind compromised. moot And extent will the to of in automobile I ups deals saw losses. to to we see any

John Murphy

much, on guys. going luck with here. Thank And very you. Thank great. everything you good Okay,

Bill Nash

John. Thanks,

Operator

Montani from Please question ISI. Evercore go Michael next Our ahead. comes from

Michael Montani

size us do as fixed then, how Thanks I that. good us high you the then, just it can follow some if the remind if can't debt book, Hey, expense probably year, to questions. to look reduction versus kind what's back was do versus has in in for variable should just morning. CapEx so to for much of you can as of on how in remind overall wanted CapEx maybe in well the XXXX, taking ask, because reductions and first get this the off, the bad at potential relation of could did the timeline SG&A, for environment? zero committed. already you go fixed to unprecedented secondly, we variable given those just SG&A, what And assuming And XXXX,

Enrique Mayor-Mora

Good morning. This is Enrique.

start a me So, let CapEx with question.

but about give in prepared a CapEx color. can million I historically, current environment, given position to $XXX spent really some give we're or So, guidance, And the in annually. not we've you

standpoint. We've capital not our essential that things. we've new pause We've store paused put remodels. a CapEx of new expenditures from And stores. paused our of really couple our on currently expansion. a paused a the majority work So, is from We've

it's we're on doing essential, if pause If not, currently. So, we're it's it.

of So, on given a in that, providing not do in to limited currently CapEx, the we're terms visibility. position guidance

and that. grows visibility As we'll to better do a be position in

managing In business. expenses, current of terms we to of the really state are

So, spend. evaluating a this for adjusting at hiring hours, place. We're labor been have example, we're expense every we all cutting and freeze We've in point really and advertising.

XX% of way terms at variable, In versus been variable. fixed, business our historically fixed about we've XX% looked has the

However, is everything state, what current that the I'd table. this is say in on

at bucket you look take looking that say, So, well. fixed and a well, we're can the at as

So, let me that. around give color you some

been a fixed has as well. a look business while we're the currently at make viewed environment cost, the we're matching historically to sure spend as current marketing there So, taking

Bill Nash

And way, Tom let by thing I'll the for about only talk the ABS. – the

CapEx, we the if about believe, XXXX and capital. I On to $XX million maintenance you XXXX, on ran of back kind go

we really stores substantially, we number there, but obviously, point. down had Enrique's guidance point, So, take going that idea although provide down gives of to you that an kind less this to can we're not that at

And then, your can you repeat question…?

Tom Reedy

the asking Recession? were the Michael, Great trended in how the during has you loss about pool

Michael Montani

that to had sale. incremental of of I'm change around missing guys sorry you gain accounting losses. during in the particular the make this, performed from a time, how of had but I I we book just in all I'm know And the kind benefit wanted And Yeah. color sure on if done with kind

Tom Reedy

yeah. Sure,

– tend saw loans. over pools we losses look the Recession. typically of the you X.XX% roughly the from some life to – target experience Great X.X% double up loss roughly where Recession, We to we pools leading they the If those at double during Great target to originated that the of saw we

ourselves, and mentioned, throughout that everyone I deals including received all As intact the remain period. cash,

and pools making guess originated immediately the any the period, I'm not The or be, some best perspective how following disruption long we've loss I'd now immediately is, were that that other out following that thing we period from I of might that predictions had. the a point performing

Michael Montani

you. Thank

Operator

next from Securities. Wedbush comes Basham ahead. go question from Our Seth Please

Seth Basham

My today. the first availability lot. Thanks good question a just And in is warehouse terms of morning.

where billion today are mentioned You but on $X.X end of you February, that?

Bill Nash

think still We're I have comfortable that. a But I we're on it. lower than said, good of that weeks couple runway we as

months. several mentioned, I As

Seth Basham

the a in sell you were other sell sort think marketplace you'd and transaction besides some Okay. at to And to do today be the if market, ABS those able premium? loan you of a

speculation, would – during think back of I recession. when capital things kind gut that the cast of characters, I we my at that, constraint was look the would did be That the be the but yes,

consider is All sales upside. less than you the than were Anytime, into A, hold or of we share bit of balance on a which less so type keeping all of want a returns, something But to we'll people attractive the our they're into going that's getting transactions, going our plan our them forward. originating options partner little the ABS economically. market attractive and as of start be and going

Seth Basham

Got follow-up the then, today. my it. is burn cash just around And

sense us would give basis, helpful. really that could a a much quantitatively be how you're more about weekly on you If cash burning

Enrique Mayor-Mora

Yeah.

prepared As a we said our remarks, in financially footing. in we strong are

have We a strong very balance sheet.

pulling the of We out have the that feel are taking kind we environment We're long in – situation, costs. financially confident pulling sorry. cash, And this come But actually exactly will are position ourselves liquidity. in out out we of to of in terms steps healthy not a current this we solid a environment put necessary striving to in sure last. how situation

Seth Basham

luck. Very Thank Good you. good.

Bill Nash

Thanks.

Operator

Craig Baird. Our Kennison next go from comes ahead. from Please question

Craig Kennison

prices Hey, And as used the good but car Edmunds curious know have And my well. you question, been already. that. please could the I still an then, outbreak? about topic, not it's question But as just since on unrelated for Many virus thanks addressed investment. taking behind the comment strategy characterize a morning.

Bill Nash

Sure.

So, you some was – kind it's at from more strong, standpoint. the from data, on NAAA look on it if an February, appreciation fairly the of through January fairly depreciation, it of was first question the interesting,

this normally at vehicles it and rising saw year time of strong. was fairly we So,

middle the decrease saw XXXX, of decline. You year and get into decline throughout November sharp and XXXX was we a like March, of And big back where XXXX. there in that concentrated a was whole to what from August we very saw very a

beginning the middle in been like I the February and precipitous very think we've February, that. a of has later, of what seen this, decline

it'll again, the on as store thing. sharp long about a go don't know kind I the decline earlier, middle month. starting we that on. of But from it Now, said closures how And was of depends and

it focused couple a control is sure you customer Edmunds years And lots them and engaging we've more continued aligns focused Edmunds And experience on over expert customers, of a been data. extensive and making of omnichannel, and enhancing is guidance. as giving have have been far very they've investing that focus been innovations, shopping, with part goes, lot – we've trusted, resource. the and As with whole and our independence. unbiased shop of know in digital with the advice really They on them the online, automotive And editorial also last our online. research that letting we

We've on and progress companies. the like content into So, at talk lots two but we synergies we'll putting benefit there's them car the that And think have a more both of lots point. will and we on about to of as feel pages, working partnership, companies. that some our already between landing we there's in tapped opportunities future with

Seth Basham

you. Thank

Bill Nash

Thank you.

Operator

question Rick Please next go comes from Stephens. ahead. from Our Nelson

Rick Nelson

push you those stores pickup near currently you closed curious, the pace? those allow reduce and over term, I'm Thanks. curbside quicker that a at that will online into are inventory open to and stores

Bill Nash

a Yeah, Rick. it's good question,

have because automotive close everyone seeing to what localities what come Most mandate service will times generally of we down, to sales, we aren't So, it pertains and is the clear needs out happens exactly currently, carved many closed have lot And a immediately – a that mandates stipulations. close. but them of us. we're as

only with locality. make appointment should the easier – to for it's only but be you allow only. push type online, to you you example, going to and the We it curbside think do of So, open, can work appointment very that much the open should

And least point, So, somewhat get to by locations we're those encouraged up standpoint. you at inventory that. and helps if can an from your it productive,

Rick Nelson

side Just you you auctions [indiscernible] think are a do closed up? push those can virtual, as that follow-up, open auction

Bill Nash

Yes.

stores, again, the have situations. you couple different just a of So, like

localities the to get the You down stores closed are and available like locations completely that inventory have some auction haven't out. even made the it

can the do another online You able have inventory will to, we an you when we where we're location where it We'll move locations sale. that. do get And out. to other

talked well understand that's this the quickly this pushing. to continue So, I past We've going sure one on as And as can marketplace. has make about of in we in online. why to the testing just move simulcast, we're what's very reasons think testing well positioned that the on very inventory to liquidate

So, us are locations even the vehicles onlines the help if store closed. to get sold those will

Rick Nelson

Thanks.

Bill Nash

Thanks, Rick.

Operator

ahead. from from Glynn Research. Our Please Edge Derek Consumer go comes next question

Derek Glynn

you Good all I hope hi. well. Yes, are morning

Bill Nash

Good morning, Derek.

Derek Glynn

would to you to equal of in shift downturns? consumer an do in what a seen recovery, the notable a that think will used of downturn And see similar How for shock? context past new we've type value we've new in this completely ultimate the you historically? expect economic evolve used throw this the that feel relationship to you demand in different Did also, to is from off seen may

Bill Nash

Derek. I a used fourth the question. Coming new the was Yeah, what you tough tell to spread we from it's saw in quarter, widen.

late tailwind bit little vehicles. a model I that of a for So, used was think

out dramatically, the SARS. environment, for that current I've are be of this manufacturers. in the projections going think I some think, It's to I numbers year, down numbers given coming from this on some seen

do part to standpoint an rebound. of on from it's I depend going to the start incentive manufacturers what the consumer think as

always quick the is I've self-adjust. to market as said, But very wholesale

market incentives, manage you into will used prices is the adjust the why an inventory quickly. which if want another and reason come to So, incentives, that very will your car ripple in increase down wholesale quickly, wholesale markets because of

Derek Glynn

then, And I any ratios if mind, covenants around it. you're can how got we this, you in about of particularly maximum leverage missed but should keep relevant and Okay, remind apologies us that? thinking

Enrique Mayor-Mora

have main covenants. we two Yeah,

covenant. charge a fixed calculated basis. ratio are those and covenant leverage a have on look-back We And XX-month we have coverage a

you report, strong very as we months. past from our year-end know, XX had a So,

So, we of lot a have there. cushion

we cushion. In two within the performance the and be still those could double of ratios well fact,

Derek Glynn

Got luck. it. Thank you, guys. Best of

Bill Nash

Derek. you, Thank

Operator

next Brian question go from from comes Our ahead. Please Nagel Oppenheimer.

Brian Nagel

questions. Hi. for follow-up taking Thanks my

discussion flow of inventory understand, So, I here. again, this to just the want for just

auctions you're sounds from is goes, still far As in cars? possible your and now the auctions as like CarMax prepared those acquisition trade-ins. where It open taking buying comments, are

the auction. question is the just bigger guess, there I So,

cars? and makes question, any and but Then I the have, way say is much given sense you question is state there your omnichannel second and ton more will much temporary to this of way cars there – is of measure of of looking that the now gauge the this focused, consumers a that customers, digitally kind help still look have to a I reading look passes? but demand maybe touchy better true more Are us once there now to feely sort the – for know demand paralysis, is more of consumers type of CarMax right is shock for a still a underlying underlying out in this hopefully how

Bill Nash

Okay, Brian.

for time open? So, two Manheim. is the question, Right now the first auctions are ADESA, being. closed players, right now, still the major auction ADESA

no virtual. are everything but open, So, is still happening. Manheim sales is there

at in reasons stores for our a get are buying, cash are we to still I appraisal Yes, very open the question, still still we albeit demand. there buying? out the of lane customers There out that because there said Your are that have just get we're car. reduced Yes, and need open who consumer out rate, of obviously, their earlier.

So, we're sure to we there that for make want that.

as in the far now. the focus And into I'm who's right the omni As kind with touch of demand, stories stores. I and about consumer day, every every day, hear coming stores

stores that And are absolutely have so, into today cars. the have the folks the cars ones are and that coming to buying

downsize who and car so that selling their a get work. jobs to have can car to selling lost to Just to the their We've just bit, to have they medical come make or little providers they're it seen and customers they're then need cash. and need sure that their car, to car, bring life a in you get downsizing

ride longer relied no have buy vehicle. there want see feel customers on comfortable a to sharing that that they You and

ones consumers in vehicle. are that today the So, there a that are need

or have who the not saw having in think vehicle we similar like I what come this at would that's back You're XXXXX. to point. to consumers in And XXXX

things. couple as of really to far depend forward, a on going as going is think demand I it the

sure country unemployed. the hit how many that obviously the Consumer seen then, you've after that, arms we are confidence quickly virus the foremost. so with folks first even get a – numbers. around is how and one, taking think, our unemployment can some is I I'm And

invested understand it how the normal. this that of and to we invested technology customers the come long and meet really are it's to share take out cycle. business them I'm hard can will that the regardless we we that sure reason terms So, looking us for for in a be get have that to that glad really what the in think will economic gain the I have give just to to is back are for, why experience demand there and the their help that to it's out market they going once on them make continue to which experience we the omni are looking vehicle, of Again,

Derek Glynn

Thanks for color the again.

Bill Nash

Sure.

Operator

next comes from question ISI. from Montani Michael go Our Evercore Please ahead.

Derek Glynn

the Hey, thanks follow-up. for taking

learn going. CECs, we that what you to related all Just that some ask about of where in process. there, is appraisals, on is able stand And remote process to wanted initial experiences then, have the the from kind how been question of

doing see some benefit that all you're that, if the side on there's incrementally, would of things to this? you other now trying look Just and ahead here

Bill Nash

Yeah, absolutely.

are I think on we're to those. continue going of making both those of – progress both

do. fact the still stores this at five helping up we far there continue this. to through those of that what remains are It that upside customer As that now as the with pleased feel we're as technology, experience and one getting very those lot point. stood the things CECs, centers to at associates, better They're we have of continue like is better train they a as we they're we leverage

we of on been think stabilization point, we really and Up rollout this CECs. about kind effectiveness. sure continue to to the work of So, it's the we'll make

even cost traditional the format. of better we're them of optimization than phase Now, moving really the a into really and to this leveraging alternative CECs make the

the not, a will far As we have you We that in this it's all continue the – pieces just that appraisals, you one the point work whether and omni but but buy as have us that that it have we're will we'll only on have to non-omni markets, we as one done online. in to to pulled everywhere, markets, car remote continuing obviously, at solution option be appraisal from tune. appraisal are an fine roll a continue is or that we'll

Operator

And session closing will our remarks. question-and-answer Nash turn today. for I for now the back this call Bill any to concludes

Bill Nash

times, I Well, that before listen, have it do reiterate for similar continued to of but your a the all support will One, questions thank you to couple challenging CarMax. we short thoughts the your other just have want today be leave. expertise. and I difficult term, we in

liquidity, well the and the the and positioned the and resources, current environment be when economy partners financial the have We to withstand stability, the the to in consumer rebound. place

this. leadership the through anybody tested about the work we to think team not the and I'd today than we this I crisis As that have and that rather have team is associates in have else a the field,

I'm that. So, by encouraged very

our And And communities. I of about can't and associates are our take the concern values. care part this am associates, our that And of customers I'm for that team. to customers, themselves, to to and enough the everything take each would just tell be – appreciative them doing you care I proud other to say to want I to the incredibly I of our demonstrate that's core that how a

come nation. time challenging know all for to we're this than know not But a ever. stronger easy. I going us. that of and it's I it's challenging through also know I better It's a time the for

you next your I time hope we'll again again, talk quarter. thank healthy. And So, everyone for today. stays

Operator

this for call. participating. concludes Thank gentlemen, today's you and Ladies conference

now may disconnect. You

CarMax (KMX) 2 Apr 202020 Q4 Earnings call transcript