RICHMOND, Va. (AP) -- CarMax reported a 22 percent jump in third-quarter earnings Friday as the used car dealership chain sold more cars and expanded its footprint across the US
The Richmond, Virginia, company earned $130 million, or 60 cents per share, for the period ended Nov. 30, up from $106.4 million, or 47 cents per share, a year ago.
The results exceeded Wall Street expectations of 54 cents per share, according to Zacks Investment Research.
CarMax Inc., which runs more than 140 stores that mainly sell used cars and trucks, said revenue increased about 16 percent to $3.41 billion. Analysts expected $3.26 billion.
Shares rose $5.29, or 8.7 percent, to $65.82 in early trading Friday.
Sales at stores open at least one year rose 7.4 percent. That is a key metric because it strips out the volatility of newly opened and closed locations. CarMax opened four stores during the quarter, including two in new markets. Customer traffic to its stores grew for the sixth consecutive quarter, the company said.
Used vehicle unit sales rose 14 percent as the companys average selling price rose more than 2 percent to $19,914. Wholesale vehicle unit sales also increased 10 percent during the quarter. New vehicle unit sales, which make up a smaller part of CarMaxs business, increased more than 10 percent. Other revenue, which includes fees it receives from third-party lenders its customers use, increased 30 percent.
CEO Tom Folliard said in a conference call that while declines in used car pricing impacted its competitors, CarMax has proven it can manage in all kinds of volatile environments and this one is not as volatile as weve seen in the past.
Income from the companys auto financing arm rose nearly 7 percent to $89.7 million in the quarter as it financed more of its customers vehicles.
Its total gross profit -- its profit after reconditioning and other costs -- grew 17 percent during the quarter. Gross profit per used vehicle sold increased 1 percent to $2,172 and wholesale gross profit per vehicle rose 4.5 percent to $927.
Expenses increased 11 percent to $316.6 million as the companys store base grew 16 percent since the beginning of last years third quarter.
Michael Felberbaum can be reached at http://www.twitter.com/MLFelberbaum .
Rachel had been driving the same car for about five years, and decided that it was time to trade it for something brand new. A recent job promotion had made her feel more financially secure, and she believed that driving an up-to-date vehicle would only add to the professional image that she was striving to cultivate.
Before doing any serious car shopping, Rachel decided to check her credit score because she hadnt done so in a while. Confident that her score would be relatively high, she was shocked to discover that her credit was rated at a 620 FICO. What the heck had happened?Score Killers What Dropped Her Credit
As far as Rachel knew, she hadnt done anything that would seriously damage her credit. She suspected that some sort of error had occurred, so she ordered a copy of her credit report to find out where the glitch was. Unfortunately, Rachels report revealed no mistakes, but a series of legitimate black marks that had been caused by actual credit mistakes. Such mistakes included:
- Too Many In-Store Credit Cards: Because of Rachels shopping problem, she had opened several retail accounts in order to save 10% here and 15% there, and many of these accounts were still open and had balances. She always made her payments, but she only paid the minimum amounts due every month. This would look like risky behavior to a potential lender.
- Closed Accounts: At a certain point, Rachel realized that she had too many credit cards, so she closed five of the accounts that she didnt really use. It may not have been an issue if she had only closed a single line of credit, but closing five accounts sent another red flag to the lender.
- High Credit Card Balances: Because Rachel had only been paying a little bit on her card balances every month, these balances had been steadily growing. So even though she had a good income, her debt to income ratio (DTI) was incredibly high. And she knew that this factor would count against her if she were to seek an auto loan.
- An Unpaid Parking Ticket: This was the score destroyer that surprised Rachel the most. She had been issued the ticket over a year ago and had forgotten all about it. The city had sold the overdue fee to a collection agency, and their communication attempts went unnoticed because of a mailing issue.
Rachel learned that in order to fix her credit, she would need to pay the collection agency for the delinquent parking fee, and start paying down her credit card balances. She was still interested in replacing her car with a newer model, so she sought the assistance of Auto Credit Express to acquire special financing from a trusted lender.
Were bad credit experts, and we were happy to work with Rachel. If bad credit has snuck up on you, we can help you get back on track. Just fill out our fast and secure online application to get started now.
Drivers Village has readily embraced offering credit approvals on its e-commerce site, dvoffers.com, but it has yet to sell extended service contracts and other Famp;I products online.
Dealership staffers must either present Famp;I products to customers when they take delivery of their car or contact them later by phone, says Lou Bregou, a director of operations at Drivers Village. Selling Famp;I online is an uphill struggle, he says. Were not there yet.
Sun Toyota in Holiday, Fla., finds itself in a similar situation. While the dealerships website, suntoyota.com, has been taking online credit applications for several years, the site has yet to progress beyond simply providing Famp;I product information, acknowledges Michael Chaparro, the dealerships sales and marketing manager.
The two companies lack of progress underscores how even tech-savvy stores can be flummoxed when it comes to creating a viable online Famp;I sales process.
At the moment, though, its not a particularly big concern for Drivers Village, which operates 16 dealerships and 20 new-car franchises at a former shopping mall in Cicero, NY, north of Syracuse. The company, as a whole, is not a big Famp;I store, says Bregou, who is director of operations for 10 of the groups dealerships.
The stores Bregou oversees produce about $550 in Famp;I profit per vehicle retailed, representing about 30 percent of total sales gross. In comparison, top Famp;I dealerships can generate $1,500 in Famp;I revenue per vehicle, which could amount to 50 percent of total sales gross, he says.
Sun Toyota, by contrast, is a large Famp;I producer, already falling into the $1,500 category. Still, Chaparro is looking forward to the time when the dealership can add Famp;I products to its website.
I would absolutely love to increase our ability to sell these online, he says.
The Tampa-area dealership started taking online credit applications five years ago, when Southeast Toyota Finance, which offers auto financing in five Southern states, came out with a credit amnesty program. Customers who made their last payments on time were automatically preapproved for a low-rate loan. The dealership sent an email blast to customers directing them to Sun Toyotas website, where they could fill out a new credit application without having to come into the dealership.
Sun Toyota specializes in secondary customers, meaning those with bad credit, Chaparro says. But the dealership doesnt run credit checks on customers until they come into the showroom. Instead, the credit application is simply a lead source.
We will schedule an appointment with every customer, he says. When the customer comes in, we know what the customer is looking for and find them a car that meets their needs. Then, in front of the customer, we assess their credit situation. We know in the finance world that everybody can be approved under the right deal structure.
Information from the online credit application gets exported electronically to Sun Toyotas customer relationship management tool and is used to populate the actual credit application, which runs through Dealertrack software.
If customers leave the online credit application before completing it, Sun Toyota uses digital retargeting ads when they visit other websites to remind them to come back and complete it.
Chaparro says Sun Toyota gets 200 to 250 credit applications a month on average. By comparison, he says, Id like to think the average dealership gets 15 or 20. Sun Toyotas conversion rate from credit applications to sales is about 25 percent, he says.
Famp;I product sales are an important part of Sun Toyotas profitability. The dealership averages $1,500 per vehicle on back-end products on the about 650 new and used vehicles it sells monthly. Sun Toyota looks to spur Famp;I sales by explaining product offerings on its website.
Prominent on the dealerships home page is a Financing button that includes a scroll-down menu. The third option on the menu -- after Get Pre-Approved In Seconds and Incentives -- is Finance Products. Click on it, and another scroll-down menu appears. It lists Car Care, Gap Insurance, Vehicle Protection Plan, Lease Excessive Wear amp; Tear and Road Hazard Tire amp; Wheel Protection.
The Gap Insurance page includes an audio description as well as written material that explain the product, along with a link to print a PDF brochure.
The other Famp;I product pages are similar. The Vehicle Protection Plan page, for example, includes several tabs with descriptions of coverage options, along with a PDF brochure link. In addition, Sun Toyotas customer relationship management system automatically sends emails to customers whose manufacturers warranty is about to expire that hyperlinks them to the Vehicle Protection Plan page.
To purchase any of the products, however, customers have to contact Sun Toyota and come into the dealership. Sun Toyota has a dedicated Internet sales team to answer customer questions.
Chaparro admits that Sun Toyotas online Famp;I effort so far is not setting the world on fire by any standard. But the dealership is making progress, and there is evidence that customers are willing to browse its online Famp;I product brochures and, when they arrive at the store, make a purchase as a result. For example, he says, it is common to have a customer walk into the showroom and negotiate a car deal and say they also want GAP insurance and Car Care, and then theyll pull out the brochure they downloaded from our website.
One obstacle to online Famp;I product sales, he says, is the amount of documentation consumers have to produce to complete a contract, such as a copy of their drivers license and an accurate odometer reading. We are trying to figure out how to sell them online, but well get there, Chaparro says.
In the meantime, the store continues to draw a couple hundred credit applications a month. Chaparro says dealerships that dont have an online presence are missing the curve.
The days of just posting your inventory on the website are long gone, he says. You need to keep people on your site and give them all the information theyre looking for.
Bregou, of Drivers Village, agrees.
If you think e-commerce for cars wont ever get here, then dont do anything, he advises. But if you feel customers want to do more online, that they want to have the trade appraised and they want their credit approved before they walk in, you should do it for your customers. Thats what we are doing.