Carmax Inc Q2 2026 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Brian Nagel - Oppenheimer & Co Inc - Analyst : Hey, guys, good morning. So the first question I want to ask, just with regard to used unit sales. So Bill, if I heard you correctly, it seemed like the most disruptive factor here in fiscal Q2 was -- now, it was a clearer pull forward in demand into the fiscal first quarter. So the question I have is, could you -- are there numbers you can give us to size that better -- that disruption? And then as we look -- as you look through the quarter -- I know you typically don't discuss sales trends in the quarter. But following that pull forward impact, I mean, has the business -- or have sales got back to a more normal run rate, and what is that?

Question: Brian Nagel - Oppenheimer & Co Inc - Analyst : That's helpful. If I -- could I ask a follow-up?

Question: Brian Nagel - Oppenheimer & Co Inc - Analyst : Just with regard to pricing, so CarMax has for a long time talked about having an attractive pricing within the market. It seems to me, just listening to your comments say that you're focusing on this more now, so I guess, is that the case? And then the question I have is, are you seeing something in the marketplace or other competitors are getting more price aggressive that CarMax may have to change some of its stance there?

Question: Rajat Gupta - JPMorgan Chase & Co - Analyst : Great, thanks for taking the question, I've got a couple. First one on CAF, last quarter, you had mentioned that you expect CAF income to be up year over year for the full year. Could you give us an update on that? And if it has changed? I'm just surprised by just the magnitude of the provision pickup because we had your last earnings call just two months ago. So curious like how could it have changed so dramatically for the short period of time? And any color there would be helpful. And I have a quick follow-up on SG&A. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 25, 2025 / 1:00PM, KMX.N - Q2 2026 Carmax Inc Earnings Call

Question: Rajat Gupta - JPMorgan Chase & Co - Analyst : That's helpful color. And just on the SG&A, could you elaborate a little bit more on the areas of cost reduction? I'm curious because it seems to me that a lot of these might be tied to the omnichannel support function because you've already gained good productivity on your in-store salespeople. I'm curious, should investors be worried that these actions might hurt your ability to recover some of the share loss that you've seen? I'm curious, how do you balance those two. And also, like, what's the offset from the pickup in advertising?

Question: Rajat Gupta - JPMorgan Chase & Co - Analyst : It's not a net $150 million reduction. Is that a net number that you can give us?

Question: Rajat Gupta - JPMorgan Chase & Co - Analyst : No, no, I meant like net of investment in other areas like advertising and other sales initiatives.

Question: Christopher Bottiglieri - Exane Bnp Paribas - Analyst : Hey guys, two questions on credit for me. So the first one is, can you elaborate on the servicing fee of $40 million, $45 million? I would think there's probably some servicing costs to achieve that servicing revenue. Just wondering if you could help us think through the cost since receivables won't be on the balance sheet, but the expenses will be. And then bigger picture question on credit, like you guys are normally really conservative, really prudent guys historically. You're kind of pushing into deep subprime now. The market's, I think beyond your control, is getting a little bit weaker. Just wanted to kind of like test to resolve, like how committed are you to pushing into subprime right now just given the macro backdrop? Is it something that you're going to pull forward into regardless? Or if macro keeps worsening, are you going to maybe hit the breaks a little bit?

Question: Christopher Bottiglieri - Exane Bnp Paribas - Analyst : Got you. Okay. Is most of the income coming from the beneficial interest or from the servicing fees? I mean, do we like to mention that a bit at all?

Question: Christopher Bottiglieri - Exane Bnp Paribas - Analyst : Okay. Okay. Thanks for clarifying. You probably did say that in the prepared remarks. I probably misspoke there, so thanks for clarifying that.

Question: Joshua Young - Suntrust Robinson Humphrey Capital Markets - Analyst : This is Josh Young on for Scot. So as we think about the slowdown in sales here, is this a function of you just aren't getting people into the top of the funnel? Or is it more you get them in there, but then they're kind of falling out of the bottom? Just any color on how you guys are thinking about that would be helpful. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 25, 2025 / 1:00PM, KMX.N - Q2 2026 Carmax Inc Earnings Call

Question: David Whiston - Morningstar Inc - Analyst : Kind of staying on that question, I mean, maybe help me fill in some blanks here. Because I mean, it sounds like at the beginning of the quarter you wanted to -- the tariff -- the juicing of demand didn't really happen in the quarter, so you were trying to clear to get rid of that depreciation. But you're saying web traffic was up year over year and conversion is improving, yet your unit volumes were still down over 5%. And used prices have been elevated for a long time now. Is the consumer just staying away, or is it that they're still having sticker shock despite this many quarters of elevated pricing?

Question: David Whiston - Morningstar Inc - Analyst : And high quality is down even at the very high end of premium, right? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 25, 2025 / 1:00PM, KMX.N - Q2 2026 Carmax Inc Earnings Call

Question: Michael Montani - Evercore Inc - Analyst : I just had two questions. The first question was really around the credit trends. Can you just give us some more color in terms of the progression that you saw playing out throughout the quarter when you think about kind of delinquency rates, and then how we should be thinking for provisions into the third quarter? And then the other question -- let's do that and hopefully get to the other one.

Question: Michael Montani - Evercore Inc - Analyst : Okay. And then the follow-up question -- that's helpful -- was just around some of the cost savings. So you had called out $150 million which could work out to somewhere around $200 a car here potentially as reinvestment fuel, if you decided to do it. And then on the COGS front, I believe you've said in the past that there could be another $100 or $200 there as well. So I just wanted to understand, is that separate and distinct? Am I kind of in the ballpark there in terms of some of the COGS opportunity? And then kind of bottom line, if it does require several hundred dollars of reinvestment into sharper pricing, is that something that you all are committed to doing in order to kind of reinvigorate the top line?

Question: Chris Pierce - Needham & Company LLC - Analyst : Hey, good morning. Just kind of following up on that question. I guess, we talked a lot about pricing in the quarter, pricing going forward, is this something that should we reset our -- because you guys have sort of reset GP expectations kind of higher with your performance. Does this conversation around pricing mean that investors should maybe reach that GPU expectations modestly lower or is it too soon to tell or how kind of intertwined would those be?

Question: Chris Pierce - Needham & Company LLC - Analyst : Okay. And then just I might get my years wrong here, but at the end of '22, I believe it was calendar 2022 when you guys had too much inventory at that period in time and dealers were being more aggressive on price. And it kind of took you longer to work through because you wanted to hold margin versus pricing and there was sort of a longer reset to your inventory level. I just want to confirm that's sort of not what we're talking about here because of kind of your commentary about September and this being more onetime. Or I guess I'd just love to hear you kind of talk through that. And apologies if I got the dates wrong, given your -- in terms of kind of quarters.

Question: Rajat Gupta - JPMorgan Chase & Co - Analyst : Just want to follow-up on CAF, just going back to the commentary on still expecting flat to slightly down. Could you help us a little bit more on the third quarter? You're going to get the gain on sale from the $900 million. But you're also going to lose like a quarter of net interest income on that $900 million, so almost like a wash. Is that the right way to think about it? Just if you could give us a little more color on how you'd get to still flat income? Even if you have like $80 million provisions in the third quarter and maybe the fourth quarter, just hard to bridge that.

Question: Brian Nagel - Oppenheimer & Co Inc - Analyst : So my follow-up question, I think we've discussed this in the past. But did you notice anything with regard to -- I'm looking at used car unit demand. Anything notable with regard to kind of the different type of vehicles? I mean was there a stronger trend, high end, low end, that type. And does anything shift as we push here through the fiscal year?

Question: Brian Nagel - Oppenheimer & Co Inc - Analyst : And then Bill, to that end, I know you've been merchandising different, so to say, to reflect the consumer preferences. But so as you look forward, is there -- are you pushing further into that older inventory within the system?