I agree they might have said that, but I don't see anywhere where they say just how unit retail sales falling 3.8% and wholesale units falling 8.3% year over year fits in with "executing to plan."

Unfortunately I think they are doing about the best thing they can do right now based on the used car market environment. What are they doing? Just nothing stupid… for now. They are moving CAF into the sub prime lending area which could come with all kinds of unpleasant surprises for them. That’s one to keep a close eye on.

When their CEO says vehicle affordability is their biggest headwind I believe him. My employer is a manufacturer of things and we finance them too through our captive. If you were a customer who purchased a new product from us in 2019 and you came in to purchase the same thing today, your payment would be at least 50% higher for the same item due to price increases and interest rate hikes.

If you look back at the KMX Feb 2020 report their average vehicle selling price was $20,380 and their average CAF contract rate was 7.9%. Fast forward to the latest quarter and see $26,526 and 11.4%. Translate that into everyone’s favorite 7yr note term now (insanity) and you have payments of about $285 and $420 respectively. That’s a 47% increase before taxes and insurance increases. A tough pill to swallow for your typical American family.

They could be doing a lot of dumb things right now like chasing high priced inventory and taking lower margins to keep sales volumes up and sales people happily employed. But they don’t seem to be doing that. They seem to be content to hunker down and wait for the market to heal. It could take a few quarters or a few years. I don’t pretend to have to crystal ball for that so I will let the quarterly numbers prove it out.

My position is less than 1% even including the puts I have been repeatedly selling. I actually like the put selling strategy because I don’t see a clear path for them to get volumes back up until affordability gets better. If I can sell puts with 20%+ annualized returns at an all in share price under ~$65 I’ll keep doing that for now. I’ve enjoyed learning more about their business just because it is so similar to my day job but at the same time very different due to their customer base.

Jeff

CarMax FAQ

---

Contact Shrewd'm
Contact the developer of these message boards.