CarMax reported record second quarter results for the quarter ended August 31, 2015. Total used vehicle unit sales grew 9.2% and comparable store used unit sales increased 4.6% versus the prior year’s second quarter.
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Comparable store used unit sales were driven by improved conversion, which benefited from the strong execution of company's store teams.
Wholesale vehicle unit sales grew 8.7% versus the second quarter of fiscal 2015. Wholesale unit sales benefited from the growth in company's store base and a calendar shift that resulted in one extra Monday auction date compared with the prior year's quarter.
The company hold a majority of its wholesale auctions on Mondays. Excluding the extra Monday, wholesale vehicle unit sales would have increased approximately 5% year-over-year.
Other sales and revenues increased 4.6% year-over-year. Extended protection plan revenues rose 1.8% reflecting the growth in company's retail unit sales, partially offset by an increase in estimated cancellation reserves. Net third-party finance fee payments increased 14.1% due to the increase in retail units sold, as well as some shifts in the mix among providers.
Vehicles financed by the Tier 3 providers, those providers to whom the company pays a fee, and those included in the CAF loan origination test represented 13.5% of retail unit sales in the current quarter versus 13.8% in the prior year's second quarter.
Total gross profit increased 12.5% versus last year's second quarter, to $521.4 million. Used vehicle gross profit rose 8.8%, primarily driven by the 9.2% increase in total used unit sales.
Used vehicle gross profit per unit was relatively flat at $2,166 compared with $2,173 in the corresponding prior year period.
Wholesale vehicle gross profit increased 18.2% versus the prior year’s quarter, driven by the combination of the 8.7% increase in wholesale vehicle unit sales and an 8.8% improvement in wholesale vehicle gross profit per unit to $951 from $874.
Other gross profit rose 24.8% reflecting the increase in other sales and revenues and a $10.4 million one-time increase in service department gross profits. This increase resulted from a change in timing in company's recognition of reconditioning overhead costs.
These costs, which previously had been expensed as incurred, are now allocated to the carrying cost of inventory.
Compared with the second quarter of fiscal 2015, SG&A expenses increased 11.1% to $330.8 million. In the prior year's quarter, SG&A was reduced by $20.9 million, representing company's receipt of settlement proceeds in a class action lawsuit.
Excluding this item, SG&A expenses increased 3.9% year-over-year due to the 12% increase in company's store base since the beginning of last year’s second quarter (representing the addition of 16 stores), partially offset by a $10.5 million decrease in share-based compensation expense.
Excluding the prior year legal settlement gain, SG&A per retail unit decreased $100 to $2,083, with $78 of this decrease resulting from the decline in share-based compensation expense.
Compared with last year's second quarter, CAF income increased 6.2% to $98.3 million, driven by an increase in average managed receivables, partly offset by a lower total interest margin percentage.
Average managed receivables grew 16.4% to $8.99 billion. The total interest margin, which reflects the spread between interest and fees charged to consumers and company's funding costs, declined to 6.2% of average managed receivables from 6.6% in last year’s second quarter. ■