Subject: Re: KMX - CarMax missed earnings estimate.
"Is a car parts price hit that really that big a factor?"


Maybe if we think about in terms of their $2322 gross profit per retailed unit it could be material. If we randomly assume $2500 reconditioning per unit and say 60% or $1500 is parts, a 10% increase in parts cost due to tariffs would lower the gross $150. Scale to 100% plus for chinese tariffs and I can see why Nash brought it up several times during the call. Their total blended parts price increase will not equal the tariff rates so it won't be that dramatic but it would weigh on the business some.

I listened to the call and the analysts were congratulating them on a good quarter. I didn't hear anything that concerned me. Much like all their previous calls they seem to be executing their plan and they are extremely good operators in a difficult business, and very disciplined in their process in my opinion.

The only thing I heard that some might not have liked is CAF saying they will be provisioning for loan losses at a higher rate than they have historically. However, they were very clear this is only due to the strategy at CAF to bring some of the non-prime business back to CAF that was going to their Tier2 and Tier3 partners. As long as they are pricing for it appropriately I don't see any reason why they won't be successful. Their average retail loan rate is already over 11% so they know this space very well in my opinion.

They need per store volumes to increase which has finally started here in the last year. If it can continue they should do well.

Jeff