CARMAX INC Annual Report - How They Did This Year

I’ve put together this guide to help you understand how CarMax performed this year. Instead of digging through dense financial filings, I’ve broken down the key takeaways to help you decide if this company fits your investment goals.

1. What does this company do and how did they perform?

CarMax is the largest used-car retailer in the U.S. They offer a "no-haggle" alternative to traditional, stressful car dealerships. They make money by selling used cars to consumers, selling older vehicles to other dealers at wholesale auctions, and providing loans through their own lending arm, CarMax Auto Finance.

In the fiscal year ending February 28, 2026, CarMax sold 780,684 vehicles to retail customers and another 538,203 vehicles at wholesale. They operate 256 stores nationwide. These operations generated $26.7 billion in total sales and revenue.

2. Financial Performance

This year was a period of stabilization as CarMax navigated a market where car prices and demand cooled following the post-pandemic boom.

• Revenue Trends: Total revenue fell about 3% from last year. This shift occurred as the average selling price of a used car dropped to roughly $26,500. While the volume of cars sold remained steady, lower industry-wide prices pressured total sales.
• Profitability: CarMax reported a gross profit of about $5.2 billion against $4.1 billion in operating costs. The company is balancing significant investments—over $500 million in marketing and technology upgrades—against current profit margins, which sit at approximately $2,200 per retail car sold.

3. Major Wins and Challenges

• The Win: CarMax Auto Finance remains a steady engine for the business. They manage about 1 million customer accounts with a total loan portfolio of $16.37 billion. By acting as the bank, they earned $750 million in interest income, which helps balance out fluctuations in vehicle sales.
• The Challenge: The primary hurdle is the "affordability gap." High interest rates have pushed the average monthly car payment over $550. This keeps some customers on the sidelines, making it more difficult to convert website traffic into completed sales.

4. Financial Health

CarMax maintains a solid financial position. They utilize debt strategically to fund their lending business rather than relying on it for general operations. They maintain a $2.0 billion credit line to ensure they have cash on hand. The company also returns value to shareholders through stock buybacks; this year, they repurchased $300 million worth of shares, signaling confidence in their long-term cash flow. As of April 2026, they had roughly 141.8 million shares outstanding.

5. Key Risks

• Interest Rate Sensitivity: High rates make vehicles more expensive for consumers, which can dampen loan demand and overall sales volume.
• Inventory Costs: The company is sensitive to the supply of used cars. If trade-ins drop by 5%, they must source inventory from more expensive auctions, which directly shrinks profit margins.
• Technology Integration: CarMax is betting heavily on AI-driven appraisals and digital tools. If these expensive investments fail to attract or convert more buyers, the company risks losing its competitive edge against leaner, digital-first rivals.

Investor Takeaway: CarMax is a stable, established player in the used-car market with a strong lending arm that provides a reliable secondary income stream. When considering an investment, weigh whether you believe the company’s heavy investment in AI and digital technology will successfully overcome the current industry-wide pressure of high interest rates and vehicle affordability.