Carmax Inc Q3 2026 Earnings Call Transcript

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

Question: Scot Ciccarelli - Truist Securities, Inc. - Analyst : Good morning, everyone. So historically -- I'm going to take another shot at this GPU question. Historically, I believe the management teams have talked about needing to lower prices by about $500 per unit to see a real inflection in the sales pace. So that would obviously be meaningful to use Enrique's words. So is that in the range of how you guys are thinking about reducing your GPU?

Question: Scot Ciccarelli - Truist Securities, Inc. - Analyst : Got it. Thank you. And then just to follow up, if I can, I guess it's a bigger picture question for Tom and David. What do you think CarMax represents to consumers today in late 2025, given some of the alternatives that are out there? And where do you think you would like to end up in, call it, two to three years? Thank you.

Question: Scot Ciccarelli - Truist Securities, Inc. - Analyst : Thank you, and happy holidays.

Question: Craig Kennison - Robert W. Baird & Co Inc - Analyst : Hey. Good morning. Thanks for taking my question. On the SG&A topic, what is the baseline SG&A from which you expect to cut $150 million? Just curious so that we can track your performance against that goal.

Question: Craig Kennison - Robert W. Baird & Co Inc - Analyst : And that is an exit run rate as of Q4 of fiscal '27?

Question: Craig Kennison - Robert W. Baird & Co Inc - Analyst : Okay. Thank you.

Question: Rajat Gupta - J.P. Morgan Securities LLC - Analyst : Great. Thanks for taking the question, and thanks for the candid assessment on the prepared remarks. I had a follow-up on just the margin versus same-store expectation. Can you give us like any sort of early read? Because we got the sense that last quarter also, there was an effort to become more price competitive. Anything you can give us in terms of like early reads in December and how those actions have already started to show us some results? Or is it still very early or have you not implemented them yet? And what kind of like equation are we looking at in terms of dollar versus same-store volume trade-off, dollar GPU versus same-store volume trade off? And any more insight you can give us on how you see this equation playing out? And I have a very quick follow-up. Thanks.

Question: Rajat Gupta - J.P. Morgan Securities LLC - Analyst : If they hope to go back to share gains or positive unit growth, what kind of the expected outcome in the near term? LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies. DECEMBER 18, 2025 / 2:00PM, KMX.N - Q3 2026 Carmax Inc Earnings Call

Question: Rajat Gupta - J.P. Morgan Securities LLC - Analyst : Just a quick follow-up on CAF. It looks like, as you mentioned, like third-party Tier 3 penetration went up. Is there any meaningful tightening effort going on right now? I'm curious how those reserves will change going forward once you go back to having more in-house Tier 3, Tier 2 type penetration, or maybe like any color you can give us on this CAF provision in the fourth quarter would be helpful as well. Thanks.

Question: Rajat Gupta - J.P. Morgan Securities LLC - Analyst : Great. Thanks for all the color, and good luck.

Question: Brian Nagel - Oppenheimer & Co Inc - Analyst : Hey, guys. Good morning. Tom, welcome back to the falls.

Question: Brian Nagel - Oppenheimer & Co Inc - Analyst : This is going to be a potential repetitive -- I want to make -- just get this point across. So we're talking about pricing and be more aggressive in pricing here. For as long as I can remember, I've been with CarMax for some time now, we've done these pricing tests. And the message from CarMax has always been the same, is that they really lower prices, but the net result has not been favorable. So I guess that one aspect as you're talking about, once again, is either testing or moving forward with lower prices and accepting lower GPUs, what's different this time? Why do you think that this will -- this time around is going to be different than the past, which actually drive better unit volume?

Question: Brian Nagel - Oppenheimer & Co Inc - Analyst : Thank you. And then just a follow-up -- sorry, David. But with regard to marketing, so you talked about, if I understand correctly, a stepped up marketing now, you put some say, that's down the gas a little more. Is it -- when you think about it, is it more of the same? Or is CarMax really working on coming to market with a new marketing message?

Question: Brian Nagel - Oppenheimer & Co Inc - Analyst : Thanks. Appreciate all the color. Thank you.

Question: Daniela Haigian - Morgan Stanley - Analyst : Thank you. Good morning, Tom, David. Appreciate your color in the prepared remarks. My first question is on that digital -- redefining the digital platform. What specifically within that needs to change to drive more of a selling experience? And how does that impact the operating cost structure with your store base? What would be early indicators of progress in that redefinition?

Question: Daniela Haigian - Morgan Stanley - Analyst : Got it. That's helpful, and appreciate your transparency there. My follow-up is on COGS. You and Enrique, you keep calling out COGS as a key lever. What's the strategy with reducing that line item? And are you still progressing towards that regional reconditioning center approach?

Question: Daniela Haigian - Morgan Stanley - Analyst : Thank you.

Question: Chris Bottiglieri - Exane SA - Analyst : Hey, guys. Thanks for taking my question. First one more clerical, I suppose, and then just a bigger question. Did you give the service profit, I think it was $4 million last quarter to security, so what that was for Q3? Is that a good run rate for Q4, given volumes are pretty similar Q4 versus Q3? LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies. DECEMBER 18, 2025 / 2:00PM, KMX.N - Q3 2026 Carmax Inc Earnings Call And then my actual -- can you just elaborate what's happening with the credit penetration? It sounds like the prime side, I suppose, you're seeing less appraisal traffic or less traffic coming in. I would think that with a K-shaped economy, that's probably the healthier side of the market. Just kind of curious what's causing that where you're seeing there. Thank you.

Question: Chris Bottiglieri - Exane SA - Analyst : Thank you. LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies. DECEMBER 18, 2025 / 2:00PM, KMX.N - Q3 2026 Carmax Inc Earnings Call

Question: Chris Pierce - Needham & Company LLC - Analyst : Hey. Sort of following up -- good morning -- on Jeff's thought there, I guess, do you think you have the customer base that wants to do more of the work online to sort of drive an OpEx offset in GPUs? Or do you need to reposition the brand to get younger? Or would you sort of reject that framing?

Question: Chris Pierce - Needham & Company LLC - Analyst : Yeah. I'm just curious, do you think you have the customer base that wants to do more of the work online? Do you think you need to get younger with this new ad campaign? Or do you think it's just about pricing and the experience you're offering? LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies. DECEMBER 18, 2025 / 2:00PM, KMX.N - Q3 2026 Carmax Inc Earnings Call

Question: Chris Pierce - Needham & Company LLC - Analyst : Okay. Thank you, and good luck.

Question: Michael Montani - Evercore Inc - Analyst : Yes, hi. Good morning. Thanks for taking the question, and Tom, good to hear from you again as well. Just wanted to dig into -- I guess it's a three-parter, but it's kind of all related, which was depreciation trends, just some incremental color about what you're seeing, the competitive backdrop, as the intensity ratcheting up, and then lastly was on the reinvestment into GPU. How much of a reinvestment we ought to be thinking about moving ahead?

Question: Michael Montani - Evercore Inc - Analyst : Just the competitive intensity.