Adjusted earnings for the third quarter were 24 cents per share, the Richmond, Virginia-based company said in a statement Thursday. That was well below the average analyst forecast of 65 cents compiled by Bloomberg. CarMax net sales of $6.5 billion also fell short of analyst estimates.
New York stocks fell 9.3% at 9:38 am, the biggest intraday drop since September 29th. That sent shares of Carvana, down 6.5%, as well as automaker Ford Motor Co. General Motors and Stellantis each fell more than 2%.
RBC Capital Markets analyst Stephen Shemesh said in a note that it was an “overall difficult quarter.” “Between the deteriorating macro environment and cost-cutting initiatives, it is likely to remain volatile in the short term.
Used car prices skyrocketed during the pandemic as new car production stagnated due to supply problems. This year has seen a sharp decline as supply shortages have eased and buyers have resisted higher sticker prices.
Carvana has faced similar pressures, forcing the online car dealer to look for ways to restructure its debt amid concerns about its ability to pay. There are also growing concerns about spillovers to the broader auto market, which AutoNation Inc., the largest US new-car dealer chain, has warned.
“Vehicle affordability issues will continue to impact third quarter sales as headwinds from broader inflationary pressures, rising interest rates and low consumer confidence continue,” Carmack said in a statement. There are,” he said.
The comments echo comments made by CEO Bill Nash in September when he warned that consumers were shying away from spending large sums amid challenges around affordability. The company’s profit shortfall in the second quarter weighed on its peers’ stocks as rising interest rates and weak consumer confidence fueled further concerns.
Combined wholesale and retail sales in the third quarter were down nearly 28% year-over-year. Wholesale sales were hit by CarMax’s move to move some units to retail stores to meet consumer demand for lower-priced cars.
According to CarMax, wholesale car gross margins fell 46% as a “sharp market decline” hurt per-unit measurements.
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