CarMax (KMX) has topped early March highs after posting a surprise profit in Q4, despite two-straight quarters of double-digit earnings misses.

Although the company fell short of sales estimates, it has prioritized per-unit margins over volume sales, resulting in clipping vehicle unit sales and driving market share loss. That said, KMX is targeting similar capital expenditure levels year-over-year in FY24 and reiterating its long-term financial goals have helped push aside the blemish.

Here are the key metrics from CarMax's Q4 report:

Sales fell 25.6% year-over-year to $5.72 billion.
Comparable store used unit sales fell just 14.1% in the quarter, a considerable improvement over the 22.4% decline in Q3.
Earnings of $0.44 per share represented an improvement over the $0.24 registered in Q3.
Combined retail and wholesale unit sales fell just 15.5% year-over-year, a massive improvement over the 28.0% decline in Q3.
Gross profit per retail unit increased $82 year-over-year and $40 sequentially to $2,277.
On the wholesale side, profits per unit were flat year-over-year, but they jumped $221 from Q3 to $1,187.
Gross profits were down just 14.1% year-over-year in Q4 compared to 31.1% in Q3.

These metrics reflect KMX's commitment to its margin management strategies, which prioritize longer-term positioning over short-term gains in market share. KMX has endured a lengthy period of high-interest rates and souring vehicle affordability due to inflationary pressures, which is not expected to ease meaningfully in FY24. However, the company's conservative approach to its capital structure, keeping its $2.45 billion repurchase program paused, maintaining flexibility to access capital markets, and keeping CapEx similar to FY23 levels should help it steer through the heavy fog ahead.

TECHS:

KMX's Q4 report gives further credence to the possibility that the worst of its struggles is in its rearview mirror (no pun intended). The company expects to sell 2.0-2.4 million vehicles combined by FY26, generate $33-45 billion in revenue, and expand its nationwide share of the age 0-10 used vehicle market to over 5% by the end of CY25. Finally, KMX's Q4 results set a bullish tone for both CVNA and AN ahead of rival Carvana's (CVNA) Q1 report, which is set for May 4.

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