CarMax’s new chief executive says the used-car retailer must simplify its customer experience and improve efficiency to reignite growth.
- Chief executive Keith Barr said the company’s online and in-store experiences are too disconnected, creating friction for customers and hurting conversions.
- Management plans to reimagine its operations and cost structure, and speed up its network.
- The turnaround strategy includes using technology to reduce reconditioning expenses while maintaining vehicle quality.
CarMax (KMX) shares fell nearly 9% during afternoon trading on Wednesday after the used-car retailer reported quarterly results and its new CEO flagged operational inefficiencies and high costs.
CarMax reported first-quarter earnings of $1.31 per share, topping analysts’ estimates of $0.98, according to Fiscal.ai. Revenue came in at $8 billion, ahead of the consensus forecast of $7.4 billion.
However, comparable-store used vehicle sales fell 0.8% from a year earlier, while total gross profit declined 4.4% to $854.4 million. Retail used vehicle gross profit dropped 9.5%, and gross profit per used unit fell $230 from last year’s record level to $2,177, as the company continued to take pricing actions aimed at boosting sales.
KMX CEO Says Customer Experience Needs Fixing
Chief Executive Keith Barr, who took over in March, said CarMax’s digital platform is too disconnected from its in-store experience, creating unnecessary friction for customers and weighing on conversions.
He said management is moving quickly to execute a turnaround strategy aimed at improving the customer journey and better leveraging the company’s nationwide store network.
“Our digital experience is too complex and not seamlessly connected to the in-person experience. When a customer arrives at one of our stores, we do not make it as easy for them as it should be given all the steps they have taken online. This has put friction in the customer experience, ultimately impacting conversion and preventing us from fully leveraging our unmatched scale and store network.,” Barr said during a call with analysts.
“We know exactly what needs to change, and we’re moving forward with urgency,” he added.
KMX Eyes Leaner Operations
Barr said several issues have held CarMax back from reaching its full potential. “Our core operations are not yet fast and efficient enough. Retail prices and selections must continue to improve, and our costs remain too high,” he said.
Barr also pointed to inefficiencies in CarMax’s logistics network, stating that despite moving more than two million vehicles a year, the company still has “too many unproductive transfers.”
To address those issues, CarMax plans to “reimagine” its cost structure “to enable a great offering,” and also improve operational efficiency.
Initiatives already underway include using technology to lower vehicle reconditioning costs, streamlining operations and enhancing network speed, while maintaining the quality standards customers expect, Barr added.
KMX Stock: What Retail Traders Feel
On Stocktwits, retail sentiment for KMX was ‘bearish’ with message volumes being ‘extremely high.’
Over the past seven days, message volume around the stock has surged a whopping 8,600%, while its retail watcher base rose 0.7% in the same period.
KMX stock has lost nearly 27% over the past 12 months.
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