TLDR
- CarMax drops 13% as losses, weak sales, and costs weigh on results
- KMX slides after earnings loss and declining retail vehicle demand
- CarMax hit by margin pressure and falling used vehicle sales trends
- Weak demand and rising costs push CarMax into quarterly loss
- CarMax stock sinks as profit declines and expenses stay elevated
CarMax, Inc. (KMX) stock dropped sharply to $42.54, falling 13.33% as weak earnings and margin pressure weighed on sentiment. The decline followed a quarterly loss and softer sales trends across retail operations. Moreover, rising costs and a goodwill impairment amplified downside pressure during the session.
Profit Decline and Impairment Weigh on Results
CarMax reported a net loss of $120.7 million for the fourth quarter ended February 2026. This result compares sharply with net earnings of $89.9 million recorded a year earlier. Diluted loss per share reached $0.85, reflecting significant financial deterioration.
The company recorded a $141.3 million non-cash goodwill impairment during the quarter. This charge followed declining market capitalization and weaker financial outlook revisions. The impairment heavily impacted overall profitability and earnings performance.
Adjusted earnings per share reached $0.34 after excluding impairment and restructuring costs. However, this figure still trailed the prior year’s adjusted earnings performance. Underlying profitability remained under pressure despite adjustments.
Weak Retail Sales and Margin Compression
Retail used vehicle sales declined 0.8% to 181,188 units during the quarter. Comparable store sales dropped further by 1.9%, indicating reduced demand across existing locations. Total retail revenue decreased 1.2% due to lower volumes and pricing pressure.
Gross profit per retail unit fell to $2,115, declining by $207 from the prior year. This reduction reflected pricing adjustments aimed at supporting sales activity. As a result, overall retail margins compressed significantly during the quarter.
Wholesale unit sales increased 3.0%, providing partial support to total volumes. Wholesale gross profit per unit declined by $105 to $940. Thus, lower margins offset gains from higher wholesale sales volumes.
Rising Costs and Finance Segment Pressure
Total gross profit declined 9.4% to $605.3 million, reflecting broad margin pressure. At the same time, SG&A expenses remained flat at $611.3 million, increasing cost intensity. SG&A exceeded gross profit, reaching 101% of gross profit.
CarMax Auto Finance income fell 9.8% to $143.7 million during the quarter. This decline followed reduced loan balances and higher provisions for credit losses. Increased exposure to lower credit tiers added near-term financial pressure.
The company increased its cost reduction target to $200 million in annual savings by fiscal 2027. Management executed workforce reductions and restructuring actions to improve efficiency. These efforts have yet to stabilize profitability trends.
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