Updated version 1 - CarMax’s quarterly profit and revenue both increased, driven by pricing strategies that boosted used car sales

The first paragraph has been updated with stock information, and the CEO’s comments have been added to paragraphs 6 and 7.

Nathan Gomes

Reuters, September 29 - Used-car retailer CarMax (KMX.N) reported a rise in both profit and revenue for the second quarter on Tuesday, as the company’s pricing strategy drove a rebound in sales, sending its sharesup nearly 10%.

Amid mounting inflation, higher interest rates and a tightening supply of low-cost vehicles, consumers are keeping their old cars for longer.

Moreover, the shortage of affordable cars in the $10,000 to $15,000 price range has made it difficult for retailers to attract entry-level buyers.

According to Cox Automotive, used car inventory priced below $15,000 is only enough for 29 days of sales, 15 days lower than the industry average.

However, CarMax managed to offset these pressures by adopting a pricing strategy that prioritizes higher sales volumes over per-vehicle profit.

CarMax CEO Keith Barr told Reuters that the company expanded its high-income customer base in the second quarter, prompting the retailer to shift its inventory toward newer, lower-mileage vehicles.

He noted that the company’s report shows only a limited shift toward hybrid and electric vehicles, with gasoline-powered cars still accounting for the vast majority of sales.

In the second quarter, retail gross profit per used vehicle fell to $2,105 from $2,216 a year earlier, while used car retail sales rose 13.8% to 227,391 units.

Total net revenue for the three months ended August 31 grew about 20% year on year to $7.9 billion.

Quarterly profit rose to $165.3 million, or $1.16 per share, compared with $95.4 million, or $0.64 per diluted share, a year earlier.

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