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CarMax Planning To Open New Stores

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The Associated Press

Published: June 25, 2008

RICHMOND, Va. - Vehicle retailer CarMax said Tuesday that it plans to open new stores and expand even amid a difficult economic environment and rising gas prices.

The comments came at the company's annual meeting, one week after CarMax said its first-quarter profit plummeted 55 percent, the fastest drop in used-vehicle values in company history.

The Richmond-based company said it expects to increase its stores from 97 to between 200 and 300 stores within 10 years and expand outside its current markets.

"We have so much opportunity out there," chief executive Tom Folliard told investors at the company's annual meeting. "We feel like it's in the best interest of the shareholders to continue to grow the company."

In the three months ended May 31, the company's profit fell to $29.6 million compared with $65.4 million in the same period last year. Sales edged up to $2.21 billion from $2.15 billion.
CarMax also suspended its sales and earnings guidance for all of fiscal 2009.

Folliard said the company's earnings have been hurt most recently by rapid depreciation in sport utility vehicles and trucks, which are most affected by rising gas prices.

The company said wholesale industry prices for those vehicles declined nearly 25 percent during the quarter, about four times the normal depreciation expected over the period.

Disappointing first-quarter earnings will "reset" investors' expectations for CarMax, Wachovia Capital Markets analyst Richard M. Kwas wrote in a recent note to investors.

"Value investors will increasingly look past fiscal 2009 and evaluate the stock on fiscal 2010 and 2011 prospects, in our view," Kwas wrote.

Folliard said that "right now with the way gas prices are going and the level of uncertainty from the consumers, it's just almost impossible to predict when that will turn around."

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