CarMax Inc. reported a drop in profits during the fiscal first quarter, demonstrating a decrease in the demand for new vehicles. The net income of the largest retailer of used cars in the U.S. for the first-quarter ended May 31, decreased to $120.7 million, or 52 cents per share. In comparison, its net income one year ago was $125.5 million, or 54 cents per share.
Its revenue rose 3% to $2.77 billion. Its gross margin fell from 14.3% a year ago to 13.8% this year. In this same quarter, new-vehicle sales dropped by 13% to 2,107 units. CarMax operates new-vehicle franchises with Nissan, Toyota, Chrysler and General Motors. In the first quarter, its total used unit sales increased by 3%.
The retailer said that its current operations include 112 used car superstores spread out in 56 markets. CarMax said that the total customer traffic and conversion at comparable stores were about the same as the first quarter of the previous year. CEO Tom Folliard released a statement to say that even if the comparable store used unit sales were flat, CarMax had strong used and wholesale gross profit per unit and higher CarMax Auto Finance income due to its solid execution.
Thomson Reuters said that analysts on average had anticipated earnings of 53 cents per share on revenue of $2.82 billion. CarMax said that it is planning to open 10 superstores in fiscal 2013, doubling the number of stores that opened in fiscal 2012.