KMX - Earnings call transcript Q4 2021

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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 2021 Fourth Quarter and Year-End Earnings Conference Call. [Operator Instructions]. I would now like to turn the call over to Stacy Frole, Vice President, Investor Relations.

Stacy Frole

morning. Good joining fourth for earnings and fiscal call. conference our you quarter XXXX year-end Thank with our and Bill Enrique today Operations. here I'm Nash, Senior Senior President, President our Mayor-Mora, President Vice and Daniels, CFO; Jon Vice CAF our CEO; and

our management's to current future In that from knowledge or forward-looking the and remind assumptions events regarding today based intent to could of expectations. any other Litigation Private obligation safe involve prospects about harbor that you, business statements we uncertainties update Reform statements, cause the are Securities risks disclaims XXXX. are financial the provisions on providing our performance Let forward-looking differ future and projections These Act make and actual plans, statements company me company's and pursuant statements of to results materially the them.

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

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

William Nash

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

today. to a have cover exciting of We news lot

our material digital focus will will this Edmunds on for it we quarter your updates announced fourth of enhancement which and, questions. open and performance course, on Then comments morning. Our we XXXX acquisition, fiscal insights, up the

our a ago. spending were for X.X% from the last quarter. same the were sales used when driving For X% compared fourth a results the year's than unit used with the and quarter, unit retail on events worth year less total record It's moment down sales, comps down period

end orders. mid-single-digit Sales December entering occupancy and January. As By in began surge were Leap shelter-in-place excluding retail towards into which trending restrictions of towards COVID-XX growth the due tightened year. cases, comp we the the of of accelerate quarter, beginning last on were sales quarter, prior our to in impact the and discussed for Day February, the we call, pressured the a to

the middle weather the the timing Sales up by were and year a of were retail both FY weather-related to sales COVID used compared the for large X.X%. XXXX. total in quarter a were sales day. unit were closing March impacted a up lower record unit affected refunds inventory XX robust stack, X last starting position when by March and fourth February, 'XX of year's in COVID-impacted March in sales with severe of stores due retail delays production a relative to across However, X-year used U.S., tax more than constraints. winter were On in also and XX.X%, portion and comps last

the of initiatives. checks and tax distribution respond stimulus weather favorably our enhancement to month, the improved and other During initial continue began, customers digital strategic to ongoing refund and

old used our demand share customer indicates we strong and shelter-in-place the half including had operations. under the centers, that data country CECs, market of start orders to up until share gaining online and in limited April. was XXXX progression healthy approximately share from X.X% closed when calendar XX% to experience we markets continued underlying website we're activity momentum year, entering X.X% our significant locations approximately were the of under in at of or market our In addition, year fell XXXX. vehicles We pandemic, current the the X- visits, into or track, Full in for metrics of indicate and head our comp XX-year as vehicles

again. share omnichannel reopened our we nationwide, and experience began market launched gaining markets was As

gains, those market, in and to our operations share the During mature gains XXXX. where saw from have accelerate omnichannel its in to last and despite months XXXX, pressure share we most X XXXX, continues COVID. Atlanta, been we the expect since outperform market of in we market maintaining XXXX, company,

of calendar During last Atlanta in months market year, our X XX.X%. increased share the the

since pricing Over of select with omnichannel the Atlanta were fourth call. was we and our quarter. the and expectations first in for improvements on past markets, introduced impact our the This increased the with our more is unit going in X year. campaign while national It last quarter's Retail We're experience. for our reflects $X,XXX tests last years, profit macro markets in in has to marketing continue we with to Early test per used results also share so with market experience, omnichannel XX.X%. consistent gross GPU out quarter and compared commentary the to rolled factors. expanded the these the multimedia testing, expanded we monitoring combination marketing our $X,XXX positive,

will Enrique moment. the We details to in aspects our attractive to around that above tests expect different in on flow-through success provide the business are $X,XXX contributing maintain a profitability just the first of these additional quarter. of margins

quarter wholesale auction the last year. period with impact you Our same good the compared another when consider day delivered business less of one

of year the $XXX profit percentage We estimate points. number quarter this less For one by down wholesale auction quarter, fourth gross X.X%. the in wholesale units several was per per unit comparable volume prior the was at sold the to impacted Wholesale day unit.

to quarter Now customer detail financing. who additional to I'd then turn provide Jon, provide information and like the Enrique? to to financial on performance; around will fourth more our call Enrique over

Enrique Mayor-Mora

Bill, Thanks, good morning, and everyone.

by an partially thank quarter. profit a and offset part-time many the of revenue. largely reduction decrease lower favorable our was pay related offsetting and for in year-over-year lower the For COVID. glitches driven and to a This previously profits by EPP company, and a announced in in adjustment decreased was million this full sales in service was functions, work quarter reconditioning related XX,XXX EPP and fees. $X by third-party you support profit Partially $X.X sharing favorability to rate across associates our other quarter, company to driven volume finance X.X%. slightly year-end bonus reserve gross million grew the in service bonuses for production whom and or million $XX This penetration increase due the

finance renegotiated fees partners, $X.X fees million with due the by talk to in improved Jon quarter shortly. our primarily the will which Third-party about

increase For unit of in SG&A, primarily expenses was per increased million or approximately million spending a SG&A in for $XX driven line the or unit, advertising million. unit our our or which strategic increase unit; XX.X% we to $XXX per per of brand by quarter. $XXX previously platforms an deleverage $XX our year-over-year the of an per deleverage deleverage heavier in $X,XXX, million fourth advance expectations technology on initiatives. was of stock-based campaign; SG&A with quarter a $XXX $XXX compensation as continued $XX to The and increase in on expense for communicated and next support was of a focus

SG&A to approach and into Our next heading costs year consistent. remains

will business our point specifically strategic continue industry, in We this our in in our and at invest to initiatives. marketing in inflection

Regarding marketing.

fiscal As in we unit expect we trends head elevated similar half into next second remain fiscal experienced to of XXXX. with our the year, per spend

digital of on Our the brand delivering will our ROI-based and strong through investments differentiating believe grab demonstrating Included clearly addition experience that is focus product market are well advertising to this continue our omnichannel vehicle are positioned spend results. such benefits promotion within spend experience, to we in the to We aggressively an increased share Car our Your focus Love on offerings, omnichannel new Guarantee. of acquisition. as and

routing through This of we our opportunity. becoming also spend, we will We our includes the in our data-driven automation, specific were expect targeting get this appropriately prior trend remain the are and smart areas accelerate ensuring FY and focused effective past more This 'XX. maturing and goal and efficient CECs are than support. efficient algorithms with year, on the managing CECs, customers of right which ensuring year, more

X% 'XX. FY on in leverage We 'XX X% comp SG&A our basis stacked to a in Regarding point 'XX. to to FY require expect X-year lever a would FY in

now, like of comp periods in lever. As business end reflective and this be approach of impacts need of investment past at due the the X-year continued year. we to we made This over in the COVID lapping the investments are to is in to we'll communicated, of range previously the higher

Now the I'd update pricing on an tests to quarter. in a take of the fourth the we aspects ran provide financial moment like to

mentioned, we Bill As so far. what like we have seen

historically cost These price several factors While originations, third-party lower structure regarding in as these of elasticity, the have we our from our and our seen structure. to variable in we to our sales the have favorable changed, greater continue resulting what a and, thereby, centralized increased profitability changes lender confirm tests factors CECs stronger leverage flow-through include fee resulting profitability. higher levels CAF

monitoring macro will tests we earlier, in first the quarter, also pricing to As perform mentioned while continue factors.

to remains sales both and unit profitability. goal Our long-term maximize

amount our still year, positions new allocation a return of acquisition of generated and Our of this perspective, cash back capital reinvest business fund growth diversified a unique significant to shareholders. Edmunds, business, our and environment. our us such model past opportunities growth in well announced the despite as core From a this challenging capital to

for with their close this and and transaction equity. anticipate we in CarMax's Edmunds, Regarding combination will EPS June impact fiscal We to the expect in financials to 'XX. immaterial have expect transaction an to pay year a cash of

significant longer confident over value are provide will this creation the shareholder We transaction term.

have approximately shareholders. XXX,XXX and program, of billion our $XX shares our returning authorizations $X.XX and are we We We during continued for we quarter, share committed million. to repurchase back currently capital executing to fourth repurchased remaining, the

FY approximately For we capital $XXX anticipate expenditures, million 'XX. in

plan be opening capital be spend our technology, investments the X open As the this later of about to first with X/X we've our ago. followed in has pivoted new we XX of FY month. up 'XX profile locations, more Approximately In in suit. XX% 'XX, years just driven, our focused business grand on FY technology expected from CapEx to will

other can the our stores openings, our locations a the and of was footprint these markets. scale nearby predominantly are with have smaller recent and and more locations As in presence leverage case cross-functional

footprint on national for a to appropriate logistics to continue be and remain these assets. differentiated investment advantage level nationwide committed an Our we and competitive CarMax, network of

we that investments XXXX. our and our gains foundational market brand making trusted recognizable up are stack accelerated for share experience, We and in in highly the set proprietary are tech our omnichannel confident us

Now the Jon. over to I'd to call turn like

Jon Daniels

delivered good and and CarMax Auto lending again our everyone. Enrique, partners Thanks, results. Finance once solid morning,

X-day applicants than year comparable tiers accounted loans in ago. with XX.X% year were a originated X.X%, a X of was payoffs, the compared from to up Year-over-year, net from the within Tier quarter, across XX.X% year CAF's Tier to APR XX% slightly was fourth at customers unit prior CAF slightly $X.X rate the customers. weighted for The of Similar this average sales compared to the credit last the of the billion. X.X% up of seen year-over-year ago. X used reflective charged attributed mix year increase in of to XX% down and X.X% third in net observed rather the in difference This CAF's primarily quarter with the Tier X X.X% with credit contract quarter. XX% the a penetration, is rate was the year. these For to space, third an compared new distribution quarter. charged quarter, to mix ago customers fourth is

from the The significant same costs. to X.X% to X.X% the interest Regarding year, margin portfolio. as lower last we benefit period overall increased continue in versus realize funding

receivables. closed with the recent and record APR to to between in rate spread pay we near January customers the most securitization the charge fund we Our a

resulting performance investors $XXX in increase we up of continue The support. an of ABS the quarter, and income The third provision quarter. was million provision, the X.XX% to for reflecting loan of plus to CAF fourth is CarMax $XXX the managed an quarter. the million, receivables, the is consistency balance XX% and reserve a lower end million in margin. reserve at $X loss X.XX% Our interest in reduced which their ending the for origination losses recognize appreciate was than of the channel, total

challenging our customers on behavior earlier. positive Our as to even we well update considers that third-party the current times. observed X an payment recently and arrangements a our continued Enrique We the receivables in adequate also reserve our is past the has both to willingness macro environment. lenders as future referenced with I the a percentage have the managed trended payments, uncertainty believe as have quarters, would of over like exhibited provide as make downward of reserve these

fee participation agreements the historically our resulted in for Our $XXX the partners purchased contracts CarMax Tier space. a with within X have agreed-upon of each receiving finance

a $XXX, of to a not changes Bill? million to Within providing lending to level, are from space, consider partners and be X reaching CarMax. a subprime goals. to the $XX Tier X approximately $X,XXX and of where X in the that of CarMax financing At historically offered the CAF changes has keeps more or would this beyond unit annual beginning a X% to will savings Tier participation future otherwise X customer of its and Tier XX% increase maintaining place and environment CAF it methodically have of structure we if vehicle Tier been this for purchase discount and long-term increased able approximately believe of rates when, CarMax volume, per we interest entirety same, fee to future the XXXX, by X volume our in Tier $XX XX adjustments, If anticipate the and basis. year. the fourth a in to FY reduced Tier our begun 'XX, continue we X best space, this remain in has sustainable X% will the the quarter, the of share and was business resulted would the $XXX. those regard Tier With penetration March on May discount evaluate and believe have in as X percent for lending

William Nash

you, Thank Jon. you, Thank Enrique.

challenging fiscal rapidly to circumstances, and strength to ability new delivered core due innovate, ever to in But the quickly strong. XXXX That our financially our invest act opportunities. enabled was business year pursue customer in growth while to most Our continue one financial of has changing environments experiences operating aggressively we've to continue and us remaining new faced. we

virtual Some of online of edmunds.com, carmax.com leverages to auctions of our highlights industry-leading have autos as all used and become national and national online and move follows: the are the experience. finally, Your rollout on will wholesale from consumers; nationwide completion year giving of instant our buyer impact infrastructure; customer an of Car CarMax expansion all experience, buyer Guarantee, as our new scale, this strengthening a the of largest that lasting us the appraisal leadership a the offering largest us positioning from and introduction omnichannel the the platform the a of into footprint our that across environment; Love signature common

for step further to we and improve digital progress possible were is critical take came they future. the and continuing the customer because also omnichannel exceptional Customer our offering how experience to the All associates. advantage to of these enhance is of our of other omnichannel work of every care sale. of response customer One They to their each together to the our for customers, while strong, innovating at model and our choose experience. the ability are

significantly XX% independently chose, of the up from components significant vehicle progress the from they of parts enabling to discussed, quarter, In approximately of a our we buy customers were transaction omnichannel previously the quarter. eligible our CECs. enables initial to all have online The for sale. buy platform self-service the As rollout our vehicle of required if assistance Exiting online. fourth the may made customers third quarter, our

customers We quarter. to end expect of second the visibility our most by have of the

in our of with approximately is online to consider digitally, purchase the about an stores. to X% buying their our advanced be Additionally, when of major online. vehicle QX, purchase all customers X/X activity transaction independent performed the up leading We

digital our sales capabilities. online our expect continue will we and to as enhance grow marketing robustly, We

discuss where and will a our data As deeper Virtual At as insight providing will expectations. our around how into are as orders hosting online on we reminder, be they new metrics well a dive also and May we technology capabilities Analyst longer-term online that outlook advantages. we on a fulfilled X, Day will time, and our and take

I'll have a to enhancements Now highlight made the recent some to we experience. moment customer take

our us with carmax.com. introduced instant has Early is which edmunds.com rollout their the first on appraisal First online offer in tested allows an response we quickly vehicle. fourth our In autos launched June. process. strong, offering the the on we pathway offers for on offer, a financing This this to quarter, online February, national give At of was been customers completed the of buys and our to get buyer with clear in online from used us customers online to penny-perfect, transactable largest become quickly checkout exceeding consumers. end the ability providing of expectations, offering

customers credit apply without of With the offers enhancements, a finance the to application an over accept and can phone assistance these submit or in needing associate the store.

test never We industry-leading This customers back to by to differentiator and show introduced innovating early a are In valued XX-hour our January, extends the Love quarter. guarantee, CarMax, in X-day Guarantee. we offerings rapidly a our will approach to drives customer-centric XX-day and We preliminary take Your our new gives our purchase, this money feature behalf to overall we but base guarantee ability unmatched know signature our automotive is Car our It's of results which industry. are trends, is in expanding back customer on identify the customer too first before committing stop experience, for to the customers. money these highly customers.

week their to marketing multimedia and of introduced and We planning omnichannel online for we campaign their differentiate As in of omnichannel query both on up spend the enhancing year our Enrique web to was the flexibility million versus February. capabilities, since XX% and to Accordingly, ultimate educate After this We we the and our prior more highly months. our as elevate experience terms, the web visits which continue marketplace. phase began Google marketing experience core mentioned quarter, both were fourth introduced, the our 'XX. FY traffic increase and In buy of national our than our on this the in evolving last awareness the want increasing CarMax that continue set next over earlier, customers being our end records position campaign successful. ensure weekly reaching it's X are volumes every customers acquisition launch, understand brand visits important on awareness to offerings, by momentum that shop to CarMax way. we offers on and and

as in signed compete auto popular to Edmunds, to retailer opportunities We will by the and omnichannel to an that scale used an pace, continue is business most acquire technology, we've physical accelerated world. definitive talent influential the across to research our to evolve one agreement This announce our and unlock assets excited why ecosystem. data, at the sites we're leveraging across a of automotive innovating

teams years, including operate brand. to and consumers excellent highest to dealer share One become selling and collaborate past strategic its identifying trusted opportunity to initiatives, and number journey, our quality experience and delivering value and online Edmunds had core value on and will have has business with well proprietary online will together the believe to OEM Over in thing the car by other appraisal Edmunds instant been its clear a focused the extremely entire additional offer on streamline opportunities. and a can impressed recognized experience a leveraging experience as is with of to across user its It carmax.com. online its remain its We've on deeply clients. the of content talented to tech is our both content that addition our and the commitment widely continue focused teams. delivering unlock digitally as confidence and We buying dealers. we technology, creative independently to customers we working that

value drive are excited of businesses. very even our of proud are we how will are size, sum competitive. in to leverage more be in positioning even as benefit up, investments year. further both and transaction this shareholder we industry and able this To our confident during extensive existing difficult differentiated scale the business and our for us are to combined We're expertise continued performance our more Edmunds about We

point, the market and experiences this of COVID, We for lapping we the and take expect happy the we've year the providing. questions. robust At are we top Carol? line, share impact upcoming only is investments bottom made a but result to will line of growth demonstrating be your that not

Operator

[Operator Instructions].

Sharon comes morning Blair. first from William question this from Zackfia Your

Sharon Zackfia

first the I have two fast. but is questions, pretty I think

of to a Can you X of you're Can be the unusual second kind inventory Tier positioned there kind and on lenders? talk in gone March, the meet you car any cost Your question of to an on amount. relative demand lot that X. unusual of has whether discount then to this perspective down idea give about the inventory? and And was Tier will profitability CAF how ramp back the us inventory to quarter you is the basis from what of a expansion up per third-party $XXX an any

William Nash

talk CAF the Sharon, Okay. inventory, and question. I'll the about Jon first, let about I'll then talk

is that the function again, some weather So the we end quarter, saleable you low. had inventory are At a that of our shutdowns. right. the But COVID fact and is of

rise in we production shut in the had to some down So locations. COVID,

the some had also down weather. shut production We of locations because

that's we're out, were why our I At up inventory XX% inventory. we're the point just at so bit. actually quarter, we if little a that on of really saleable a end think saleable And year-over-year, inventory. overall look would the I down you on though, little bit behind about

we've got of just inventory. producing. So a It's matter the

the In quarter ended I think fact, north of XXX,XXX we units.

a the just confident working we're it's that. capacity. through we matter of have And So

the back inventory Now just getting of a our target. to matter it's

answer I'll and CAF the Jon -- let So question.

Jon Daniels

funding you it year, Yes, from discount. see sit per our the X unit on consistent for Sharon, to Tier that moving relatively We'll pay over and X, X% this to the can Tier depending in question. environment. a of thanks for on in the is to $X,XXX and CAF, XX% It funding compare that we $X,XXX your profit between the out vehicle would will costs -- plays On course $XXX how vehicle. that's

note for impact important the those loss CECL that because immediately. regulation, to, an have book we though, full is, reserve we point of as think will here I to of loans,

play the time. probably And upcoming profit so will us headwind for lifetime be out will in this itself a But year. the therefore, over obviously,

Sharon Zackfia

what there that on So there it are Can disconnect what's Is is says ask cars. actually there website the website -- right now, XX,XXX on your versus I between some have? you a just follow-up?

William Nash

Yes.

that now Sharon, So seeing the on saleable inventory. website, all right is you're

you very far coming have don't that customer as on are What see there little We soon. transfers. we put as

You don't satellite. and store a are so the transfers going stores, say, a that see between hub

sale You don't pending. see

you into you see what at If took consideration, then, XXX,XXX that include you which you course, on double in And units currently of is that it website. all to that the total the have. gets least we actually number the the process, really work about doesn't

Operator

comes Your Craig from next from Kennison Baird. question

Craig Kennison

appraisal And then that your said rate of you've want of or consumers. on a you that share using metrics illustrate related total used levels Bill, CarMax your to on online you your autos note, of cars? for the that to be those estimate the market is any source terms cars? buyer you're addressable from in buy can largest number activity the to activity What tool

William Nash

exchange every continue in to single about of to We're Craig, let already cars we first largest cars to think I every of from million one Sure. It's obviously, used certainly the that year. total consumers. addressable just buyer want from so cars person. buyer largest I something. consumers. is XX used buy me number, be clarify the of the And all, want can. not I used that hands that person market, to If

got more the of online as It's we some that's this. only it On those expectations. said, at from before been whole, seen relationship buy we how think, the And of the market. were I lane offer, So of of as we've the carmax.com we where our far And in really towards we're those total most XX% we about of that. really overall trends up short I we the quarter, of that, carmax.com, think excited obviously, as I made. appraisal of the we exceeding yes, with middle just that because see kind But through the buys a as up than anyone we have about online appraisal very so month. came testing, of consumers. so things And end the buys online order, have look partial going, trajectory February, about else quarter just got Edmunds. But the buys we'll the kind if our

Operator

from question John Bank next comes Your America. Murphy of from

John Murphy

lot of of now flow maybe wanted grabbing maybe a resale. as to particularly very with access some to this even higher new of and kind used on I a secondary vehicles or competition funnel obviously, is right without stay dealers, vehicles well buying itself I into the market, questioning and market selling in the obviously, market. on sourcing just mean, trade-ins, And But tight vehicles. there's lot line the of as people new new getting are that the vehicles. the are dealers vehicle some to also they're

on of yourselves so to angles focus acquisition, just a the harder these is a big sourcing is in directly what know purchase other and making really, and key of that And dealers lot generator to get And that than little the Bill, for focused a online? retail Edmunds much can this to Because forward, maybe it's Is for there's somewhat dealers, from consumer a by of competition curious, of an you this really to as a what the then increased other or you this how shift you online? think going also, Edmunds is here sourcing I tightness more is get lead delivers. it is? about So the secular of vehicles But this lot the vehicles key supply inventory? transitory? how is bit much it is

William Nash

hit I'll try John, all All this. right, to

there. stuff of in lot a got You

look little a CarMax. talking that if the is the supply of we you quarters, amount great we've all, down anything helps get going initiative the a lane. through at probably alleviate supply for is The that on. to been of First thing to a really out prior about is your for several vehicle bit outside appraisal strategic versus acquisition point, as we've there, yes, And such us been It large years. focused

our with the a this of focus continue really buying why we and to as one Our focused self-sufficiency, here. the which a vehicles as to the online we've increase consumers, competitive to from it's we think in of drive huge continue potential again, And as and right reasons see advantage. is we it, much invest we'll been is can to on

We've as things we transaction. we the still But it, of the companies successful online There's for a absolutely together of lot It example. components. Edmunds acquisition. piece goes, small Edmund. that's X a small having both will has strengthen and on as far to been come Now It's opportunity the reason piece. take that think have decided to companies other on That's like them. that other the Edmunds acquire been look, feel that only there's great piece only of that of whole we a Edmunds, and there's working partnership of benefit X not do the content, the with a

and the a the is lane, increasing self-sufficiency A buying us going So A through or focus absolutely be it for through that, online whether through traditional forward. lane

Enrique Mayor-Mora

that Yes. doing buy All we're always It's we'll to important remember that than to so. have cars do we extending better that to we're continue is well online. as anybody. now We and

going combination that the in-store continue doing to online, anybody. just of and So we're better than

John Murphy

it from from XX% kind move going to times, flows. I this consumer will sometimes directly an and idea as XX-XX, in source to go different just guys away XX% you're around of we auctions? of opposed -- vehicles sourcing auctions? kind and I is give know consumers where from ebbs traditionally thing where XX% you think to to thought but you us the you Can of mean,

William Nash

it think is way the self-sufficiency So the on more John, I about side.

it, let's a I a call the, it's are But the, let's or on side, somewhere historic of a them I from think been self-sufficiency not self-sufficiency. we the breaking want would call to in it, take First wholesale whether X all, I we've numbers -- highs, years. all. over expect XX% think when car, retail the ceiling really us this that self-sufficiency to XX% if of kind to last about the

far to can that north to is goal we our side. number So the on push see continue how

Operator

comes Basham question Your from next Seth Wedbush Securities. from

Seth Basham

And how to much thus the some could those? How have color for are spot you price hoping the was in from tests, terms I of Bill, you expect do broadly lift seeing discounts? tests. you far? you sweet more provide learned extend around What

William Nash

Yes.

of talk bit the test. But about let in expand extent said the -- I'll we of just talk focus and Seth, I'll little comments, so kind the I about as test, Enrique here. the a did the So

a stores. test the We in of have bunch

we I in different just to do and never all And this stores, sense. the very between It different know the in -- will and different elasticity is expect markets. would markets stores. differences say that Now would make the doesn't we

little that macro factors. lot obviously, as we're standpoint. in I've there's a as a monitor we're up going little right tightened quarter, continue in -- this has the into going So a going the a remarks, on far question, to lot We as the And about, the first now John's bit. with from a said opening but to of talked macro supply

on, You've side got some going on new things as as car the car far new availability.

are got that You delayed of into been that March. have -- tax and refunds we've going kind pushing

out money stimulus got there. You've

macro Also kind watch. different things of have factors, you of there's on. a going So lot to

to And in continue what You to price monitor are margins, your competitors all that's consideration. take whether that their or have you sales their doing. just

these. Enrique some So just with and profitability him I'll it expand said stuff. Like over the of But earlier, we're we'll on pleased continue let them. Enrique to turn with

Enrique Mayor-Mora

absolutely. Yes,

So driving And sales this lower driving sales same things. it's things, for the We're also at we're seen profitability. time, is elasticity. really we're for of right? solving X remember, is to solving we've X test important the level One But in to increased increased what for same prices.

greater variable we've well third-party as finance fees. seen reasons is finance kind migrate the originations flow-through. in higher renegotiated income, as environment greater this lower X profitable so Number profitability what that CAF why is second And is flow-through, the more just much seen we costs there's we've of CECs. one our towards really However, and as

And sales seen, increased results. increased profitability. We've so really the we've pleased and been with again,

as expect to the to continue also while we So and, mentioned, watching Bill macro environment. test

Seth Basham

helpful. That's

to picture? out a you roll this all do unique macro a with better Obviously, time a chain? mentioned. this across the or factors you the of plan data multi-quarter as when you period a to clear on before Just follow-up, be Could have you have is test this not expect whether

William Nash

Yes.

question, I it's think great Seth. a

results. generally up the quarter rest internally. quickly. factors I of factors, get said, -- these it. we shapes But very this of because on Just reads versus more We we've Like to macro got like macro from those got -- read how of we of see kind the we it's the again, to

that. would stay on tuned I So

think I we'll on -- the probably Day have that in May. an update on the in Analyst

Operator

from question Oppenheimer. from comes next Your Brian Nagel

Brian Nagel

merging going got together. I've So a questions to -- on of I'm couple

question in business kind better -- us the the a help a regard Can talked about thought was for to you And we've the particularly at renegotiation into I to you to long increase hit. bit I QX a a who mean as before you sales about just shift guess, fiscal But against weather you -- into the guess, or I then watch why second time, with company on Why until of CarMax -- the fees finance unit those that a you allowed unrelated. used Bill, the just now? of just car with the what have, this make the this mid-single-digit February point? March. -- in it this I talked off, long regard size time. to -- reacceleration, of First business,

William Nash

cars to actually, I you about it's sales John X let if talk about actually the a CAF in the think us just like history. we really record would to COVID first the impact. month way sold doesn't March comps because company's I this the really think for us. think them than The been year XXXX, I that sense years last ago, if on the it are us. absolutely what going the think the mean, to just into is I to I of of drive tailwind control. some that, of our of of be March excited lot stimulus, sold. performance you in can't performance, remarks, the you, Great, about robust. the more record about our the March factors most opening And of tell comparing or are great number a XXXX March, in speaks about which years And about as top I but moment. the we're -- XXX,XXX When tax beyond X ago. sure, month it's compare somebody it's you for And so that X believe the that's month said really helping seeing for money pushing on. some Brian. a a questions and encouraged that I about about I of of a on that. asking. X I'm that the what's get I just of Look, we're about -- year been in was to vehicles double-digit taking appreciate of But March March, make for March, time going some we the March refund great growth things tax them tailwind. has I'll ask this of think We've should macro is really It's versus old of year beyond

we're we XXXX. our opening in excited about as -- said So remarks, we're

just sorry, a The just I'm FY XXXX. very -- quarter, I unfortunately, it's quarter -- us. would XXXX year the ending -- everyone. of the remind think for I volatile it's

line it double-digit growth, 'XX, to a comp high year, If was FY great top growth. mid-single-digit go back you

the the the has continue we very pandemic FY that point been beginning into of volatile a been it's We And place, since 'XX, obviously hit until up in then the pandemic. year.

with last had and the into market of cases. state And beginning the than give worse of went one caused XX%, I'll had that limiting market XX% most some bunch volatility mode. of the occupancy And mode causes back the the in we that typically restrictive big quarter, perform call, The about is of -- into back to we states, fourth the of we markets XX%, A the also COVID restriction California, started went north example. what we average that the that surge like talked organization. in been lockdown a on a of you that that, at pandemic Looking that of December. the which December. at quarter saw has one to rest occupancy XX% XX% in of

that the Both XX% were on XX% is than more of XX headwind in stores less and less and that occupancy we had restrictions than us. had difficult January. X we those December that So in than occupancy, for -- months,

north to We end at didn't work the But to was We it's and XX% better But comes get if We're like have We refund into though it even have investments -- were I that said, at into weather. hard into started that January, comp, of looking we the started we down negative. remarks, which tax our trends most just continuing we occupancy restrictions. forward. prior given in being the I such look we we didn't of X% said that X. negative restrictions, that. looking the then clipping a our feel manage You had thing, hall, that there month. contend that's able to What normal, But saw we And excluding think with the we and delays. February, even were January, traffic year Leap December, with in impact occupancy the above, comps bad some were that. were through store, Then along, coming in than get to do we these really at were coming And the can normal is and we still the I the seeing of December. January, opening mid-single-digit of if really about. do Day. great we out

Day Saturday, stores Now keep in the mind, of busiest at Leap year and day are was week. a last our the

refunds. were then tax and So weather the the and excluding of delay that, mid-single-digit constraints just we hit at the comp, we

returns I down think, year-over-year. were February, about in XX%

on color a So that. more that's little bit

about it to Jon the pass talk other to me questions. Let

Jon Daniels

for thanks your the on Sure. piece. question Brian,

was fair And So now. your a why question question.

lending really, things I'd to there very a favorable think right now. point three think, I I environment just it's versus

and funding finance companies money customers anxious are It's well. are to lenders think I those and are performing that I That's customers think environment. extend performing favorable very a well, absolutely clear. to out

And X things CarMax's of I our all made in certainly easier. those So are it about growth. excited our platform think really lenders

the CarMax So they're love excited about in future. what's collateral. They coming

right feel time. it things just the it all So made was like I those together,

in we as offers the about be we in all or scale platform, our thing from deliver the economic such platform, entire though, home, drive think partners the platform, to want do the might platform that can fees participates that highly we it our we're discounts, the in credit whether across some the we competitive and CarMax CAF that to think where that is fees have scales. spectrum And most to important looking as finance environments. want I

platform changes changes look make to So time sales careful strong It we're at And very what we right the stay but of those focused there. credit if will the to and to now, fee always in that look felt on future, the we any we looked optimize at make impact providing going very the it. were were and offers.

us. most So important that's to the

William Nash

for right Brian, occupancy one about more of although I'm want I about But X/X that's going that's thing, less threshold too. an of than I stores have restrictions. only point wood. talked we we on at our have XX%. still the one knock that now, occupancy factor this point And restrictions, as just is again, the us. key to to on important store out.

Brian Nagel

I the color. appreciate it. all Got

just to Bill, clarify. So

that digits what and from heard up double that's number March, double the from up you that's cars, of -- if month was right, digits for sold XXX,XXX the 'XX. saying you're So I

William Nash

correct. be I we That's thinking think And year. the that's way should all this about

comps exercise. year think I this that's that's a just relate trying think I I -- a to last don't versus think, year, good

relate and a think 'XX, us, which of year great we it back to I we was for lot should a sold cars.

what's that because double the that was beat And past you that encouraging record, and by -- we really is that's look if of digits. so March 'XX at

Operator

Ciccarelli Your question Markets. Capital Scot next from RBC from comes

Robert Ciccarelli

that the Or I that can stores? that includes on new just verify Well, just comp? total question? Is referenced is you Brian's double-digit

William Nash

It's both. both. It's is That and total. comp

Robert Ciccarelli

Got it. Helpful.

blanket with -- were on Or seeing just at in in to and the blanket details anything trying rolled pace of your you And Atlanta one since kind provide things of the you're sales you're are perspective doing doing especially cetera, I hadn't is sales help know offer a Because everything pricing there to can that, like that everyone point, et you're the omnichannel there any everywhere. kind variances, that out from more what is at understand related of offering? marketing given a share testing some So in market you market unique and this market? kind seasoning point? unusual you a that

William Nash

Yes.

the fourth we on look as I the maintained at the -- the quarter, I opening the in Scot, were actually in So Atlanta said Atlanta, comps market about in share Atlanta. remarks, And if actually X.X%.

we've we some have that. you gets some -- also had stores because rolled that the in but waves waves we that look, impacted encouraged And some weather, that So weren't. we're older again, then out that by waves it the -- hard to by comps also omni look quarter, had the were at

again, So Atlanta of is kind the look clean at it.

Atlanta. the pricing from looking in had doing As that far of different the expanded a started things, we learnings test and lot when marketing, we that was at the as

So obviously, to we're out -- that starting we've in to markets. other started put

to roll thing first Atlanta. we put for so first. things market self-serve, roll that remember think we there in other about the out, Generally, think if we the things example, new is is you when I

they're bit earlier everyone getting than a So else. things always little

it. a were I I difference quarter of the -- the So available second customers well. work. by to end again, we've that quarter, self-serve, I as We think have that the -- the our because team that XX% think customers will that coming -- we got that done of out would about of option. would And has of tremendous the most other the use second amount of But to point the be on just excited the we're

Robert Ciccarelli

follow-up, any than just the And utilizing helpful. differences be? for cohort if typical I one what would omnichannel customer people can. That's there demographic Is more your

William Nash

come don't customer -- CarMax it No, it's interesting. in into any mirrors see Yes. We the big much shift store. demographics. would typical really very It's that the

Operator

Montani next Evercore from Michael comes Your ISI. question from

Michael Montani

that. a where could, the for I for fourth quarter for and prior ratio fiscal then Just was I wanted had then the follow-up to And ask, year. self-sufficiency quick if

William Nash

Yes.

and of the -- fourth around a XXs, or the the really percent, for XX%, where above year's -- kind down Michael, the bit quarter XX% around self-sufficiency was prior to it XX-ish So quarter, in mid-XXs, little it was that's from mid- was so. up

Michael Montani

the you some was doing maybe the all a just on tailwind, to of price suggests kind be transfers. it tailwind like sense I of would unit, magnitude it if to that flow Okay. insinuate then from and just all free I all of as of you're else had of that thinking going And to lot follow-up down, been that potential that $X,XXX guess, really And is on seems sharp getting GPUs it wouldn't GPU $XXX a with but get still I've a equal. I even through, self-sufficiency. to

competitive wanted about So just understand balance that to as well. how think you striking

William Nash

through the I good point. from profitability it up -- more think appraisal I a buy Yes. lane, obviously bring mean, a you it's mean, better the is we standpoint. I can

cases If you the fees from an paying in a not the at cases. They're actually all not think we auction. to about lot you're auction don't right it, of them now, In store. -- we're having transport

we'll to to manage take the we'll we So manage times, prices, synergies, our see. obviously really And Other overall and option at want for have which the margin we to we we our hard be get guys that's and margin. how would take of of be. times, where pass obviously, to those in you along part some margin

we look consideration at forward act, continue macro to it's as continuing we'll as go one to on pricing well So the it's and into that take a balancing factors as our test.

Operator

from comes JPMorgan. Rajat from question Gupta next Your

Rajat Gupta

XXX,XXX shift give have other like the March. shift, March there talk just in that. maybe because stimulus quarter in how and sense weather those from one on have channel year? recovery to a you of Texas, way some poor for some as been us March delivery in units a -- more Just And Like may to Feb some XXX,XXX the just the is mix of refunds quantify to you normal just in And from follow I and purchases any volumes like Maybe about have tax alternate of seen follow-up. fourth the number up as deferred any could of many well?

William Nash

shift, especially refunds. the quantify, delay in between to break really, tax hard sales the as far as so the it weather Rajat, it's and down Okay.

Day, way would best to about not is where about how would of kind I think up. the we middle ended February, comp. think of the that's obviously, mid-single-digit a running I about have And Leap impact -- into the that been earlier have coming we February, excluding it talked of that, we

X. really that's taxes So negative ended but That's to We the up way it's out. hard to think weather and way much about one combined, to is know impacted. about. at it's how one to think X, parse the hard exactly, obviously, And

want delivery, alternative to pickup it's while still curbside that's overall That's of they remind just pickup. it -- -- it's have If that far pick Again, in one they delivery. or reported seeing delivery, out also the is it's to we're drive home again, a but it, on delivery as is customer home So experience great. still like delivery, express the both XX% under the If we this -- want. number, they about to it's not we're up that. trying alternative the store, all as everybody, giving want And great.

So it's -- XX% it's under -- but to answer the of about overall. your question,

go of have a I May, That's metrics. new And And that to sales. about -- they then Rajat, in customers the is thing, these the more whole get the whether us, to on if don't our call. it's the introduced, X% online. fulfilled, it which think other continue thing of we essentially the we'll store that we online talked expect But on did is metric this And care I kind X% at-home. transaction how or it's in that up. obviously, way, a we we're to new

Rajat Gupta

Got it.

And able that to the kind any stimulus March? have helped so a impact in package any have like of from had have just that? that contribution you Or of growth separately March? might question, to gauge your what been Like on previous might sense

William Nash

Yes.

about So an I it's weather got refund. it's ranges, is It's thing the we're gauge. just tax But you've seeing increase on and in I feel different It's the And that tax stimulus. beyond delay to obviously, we're exact impact. we the so and making it's investments And that's is But It's mean, the Again, beyond science. really that think different excited hard we're beyond not the speaks like an excited about. that weather delay having rollover. the we've it like fronts. been refunds. all to what many the the

Rajat Gupta

you then Got just it, on the And bucket SG&A increased cost overhead higher it. investment. The got That's moved helpful. line, talked about sequentially.

were some Our like were some on permanent took calls, there. like on understanding, based there earnings that previous comments place reductions

fiscal on we think how Just how item going should What just investments versus about cetera? variables, color really on et would into XXXX much that of beyond. So curious be there? any going and are that kind line specifically is Like helpful. on fixed

Enrique Mayor-Mora

way Yes. the we've to that and at an the industry is growing investment is now. think about that's so CarMax, right time The in now The we believe and absolutely been business, it the point is right we path inflection forward time point, we're in invest taking. our

our focused the line that that but continue tags look as specifically. light strategic recognize we'll of other efficiency speak that the investments investments question, business, business, that strategic talking think we're we making impacting We'll some expect offset the has item go over to on, -- That to always really multiple It is gains our focused year find and used of appraisal also important will be business. would of I Day. SG&A. we past some a unit the investments, speak and also we're by in we'll you'll upcoming SG&A and think we at to our components been have be just around in how not it's our To offset actually to about to line we growing Analyst of and your these are think on, wholesale have across our in line I the answer our technology. up. and that investments about specifically our investments where will well which that business

William Nash

business. focused we the And on all is cost year I in different -- add omnichannel to Enrique's the a SG&A you that were the in and an of our we're all Rajat, seen to this time to parts continue would bend to only thing have But is experience, cost from of other improving -- invest, our that point, curve if standpoint. the now investing continuing was a would

of is to also look got at why lever. -- X% in the So you which said, order Enrique to to two kind the year X%

just that I as wanted well. add So to

Rajat Gupta

in more then on if just squeeze super one could That's it. the I Edmunds. And helpful. Got

will be deal? from like like I guess. from neutral including Will color go something? a you an all. Just that on Or will or any be to reporting the effectively? profit that? standpoint, or way like separate like about be it and line When the talked helpful. like just accretion think contribution in You gross Any That's EBIT that financing just equity, would the about item

Enrique Mayor-Mora

step you well What anticipate I'd profitability. so their a certainly, what was Yes. reporting the significant to acquisition, We well. to impact we be transaction, you'll you that and expect as it's tell dilution that we'll do take if last create back order value though, view year's today, have is you, the accretiveness, upon impact as an from Edmunds immaterial announced tell operating a into, amount the revenue I'd segment, we of creation which as start the What shareholder fairly revenue, is we a in expect an really immediacy. that CarMax short from as in to

of people accrue relationship. so seen we've with largely the familiar benefits the and both exercise we we over pull there this year past partnerships. And are with We our our what the we full decided acquisition, really for have past because can and the great to at from Edmunds year option benefits partnering been the over point, our

Operator

Nelson Your next Stephens. from question comes from Rick

Nels Nelson

on pretty Like curious document. business. to that when view see And when side. normalize might they the and hit? impacting new will how you I'm It's constraints car how any low new are that car your supply you as supplies think impact

William Nash

mean, Rick, they're car Yes. major hard continue ramp to it's going the shortage. know up. I obviously to chip to some is when facing new supply

that the around I said, some of be appraisal while. back the comments, a organization. to is of That do my here the tightening -- lot better being that, we vehicles we source more supply go the of supply lane. the to think for for is our And I going the which a is earlier through it

feel all supply don't So out our which for there's -- I on supply rely we the inventory, of wholesale plenty like of there.

up much for bit overall a we're add everyone. to top have You've buying an really appraisal that the business, of our doesn't to sales other impact got it on the is to work little that so harder, but it go could lane, than I much price -- because the price on sales average cause would of

Operator

next BNP from Exane Your Paribas. Bottiglieri Chris from comes question

Chris Bottiglieri

place. environment-driven change things piece trends. this Or moving structure that to is to this So first I on the lower -- that getting expect Tier fee X. like, like stick? one, once go fee. Congrats of that losses lower, whether in want bizarre Do credit kind is X, the in But are I it's we're higher want in forward sense Is perpetuity, that this X up world in, will you pre-COVID exit stay? Tier understand, if the permanent? that first Never right, we Tier the made follow where but on to what $XXX or unemployment, back to

William Nash

in optimize positive We're Clearly, growth clearly. mean, the we're going now, to haul. question, to hard I there. very Chris. operating They stick. fluid environment. is credit in for are the this This It's looking a I the very potential always which but right thanks long say think environment see it's Yes. lenders for it's the if to platform our

times Again, keep a forth don't will whipsaw fee and after will we to I we So assess want one thing it and the eye We careful work give it. carefully bizarre place. economic drive in good offers we well. times, home customers provide and have times many They to is, able our partners again, our partners, structures with as the our that on is expect structure them quarter, with quarter in back quality economic are if to we the all correct. but

the where they incremental believe that truly is to space, sale. Tier had So years, including X over that success an critical have we been have we the the

them work platform, everybody So we're we that winning this and to We make very sure them. growth. with poised in value for carefully is

real feel good we So platform now. about our right

Chris Bottiglieri

the That's my CECL a of then environment is about you. allowance. on second noise loss helpful. then really and a year question the we Got spoke because ago lot next And this Obviously, implementation.

for CECL us your back to of normal, just still normalize, say characteristics to been about like kind number of the what's should Like let's goes like just what how kind normalized world you is help credit hard intact. Like Like allowance can to given a of you're frame Like think cycle? It's like? look frankly. what's So a the that allowance? the looking forecast, allowance normal the for today? look risk profile at losses

Enrique Mayor-Mora

Yes. Sure.

So the recovery Remember, this also you Remember, quarter. allowance, is X metric receivables, that the previous for that is divided the I'll X.XX% and the quarter. it's required for X to, CECL. point again, by in the coming expense down reserve allowance Tier that from Tier X.XX% metric

is back north And X% revert Obviously, what X expect to So to I would again, business. still you business Tier you would that recovery But to back normal. of that I X.X% get of in X.X% quoted the things north we probably in for where consider say when the point to X% we're there. to still we for always go Tier would We've we're X normal it. times. Tier X

Operator

This XX:XX reach Nash waiting Bill as back concludes questions reached can a.m. out turn I Those Relations have queue our the now question-and-answer session to remarks. over we in to are call Investor for will the to who answered. closing have

William Nash

our to forward business us just job little of how bit and appreciate past and This that's it online the Thank each of our business feel all again the and share make really helping industry associates we take investments, the and did self-serve, May a on support work look deeper us future. And not to talking our appraisal, create challenging other their team with covered takeaways. both trajectory the with to year, really moment but extremely acquisition you, X to We're to quickly thank it in Analyst finally, of will an few the we that talented remarkable a car with a And forward One, and customers, investments, you the outlook we will a an allow want and stronger. May fiscal to I'm the share. was like I'm for to on A only for ability Look, discuss the finally, think to to XXXX. past and Day new Day innovate Edmunds forward. the innovate to things contributions. of metrics all into taking our on we're and associates things continued our a X. on about to look I the and thinking your that unrivaled proud about our working for care of also the all experience efforts. you at capture proud all them. current And of about company of call, tremendously on at great Analyst their market excited everyone, the We CarMax, innovate I companies And lot omnichannel today. Carol. we've like value innovate, that proposition increased dive

Operator

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

may You disconnect. now

CarMax (KMX) 1 Apr 212021 Q4 Earnings call transcript