CarMax Second Quarter Story is of ‘Demand Destruction’ – Morgan Stanley

By Sam Boughedda 

CarMax’s (NYSE:) quarterly results, released premarket on Thursday, demonstrated the current strain on US consumers.

soaring and rising have weighed significantly on consumer spending. As a result, CarMax’s missed consensus expectations.

The company stated several macroeconomic factors impacted its second-quarter unit sales performance, such as “vehicle affordability challenges that stem from widespread inflationary pressures, as well as climbing interest rates and low consumer confidence.”

Shares of the used vehicle retailer are down more than 23% following the premarket results.

Reacting to the report, Morgan Stanley analysts said the earnings report “rings the bell on demand destruction.”

“Same store volume down 8.3% YoY, following last quarter’s -12.7% YoY, is similar to 2020 levels of unit volume decline and could be a telltale signal for the rest of the industry. These past two quarters, ex-Covid and ex-Financial Crisis, are KMX’s worst YoY unit volume decline on record. KMX claims it fared better than the overall market,” explained the analysts.

“The story of KMX’s 2Q is clear: demand destruction. High used prices and rising rates causing a buyers’ strike with knock-on effects on SG&A and CAF,” the analysts declared.

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