CarMax reported results for the third quarter ended November 30, 2015. While total used vehicle unit sales grew 3.2%, comparable store used unit sales fell 0.8% versus the prior year’s third quarter.
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The comparable store used unit sales performance reflected a modest decrease in store traffic, which was largely offset by improved conversion.
Wholesale vehicle unit sales grew 3.4% versus the third quarter of fiscal 2015, due to the growth in our store base.
Other sales and revenues increased 6.1% year-over-year. Extended protection plan revenues were flat, as the effect of the growth in our retail unit sales was offset by an increase in estimated cancellation reserves. Net third-party finance fees improved by 10.4% primarily due to shifts in the mix among finance 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 13.7% of retail unit sales in the current quarter versus 15.2% in the prior year's third quarter.
Total gross profit increased 4.0% versus last year's third quarter, to $464.3 million. Used vehicle gross profit rose 2.7%, primarily driven by the 3.2% increase in total used unit sales. Used vehicle gross profit per unit was relatively flat at $2,160 compared with $2,172 in the corresponding prior year period.
Wholesale vehicle gross profit increased 5.9% versus the prior year’s quarter, driven by the combination of the 3.4% increase in wholesale vehicle unit sales and a 2.4% improvement in wholesale vehicle gross profit per unit to $949 from $927.
Other gross profit rose 9.2%, primarily reflecting the increase in other sales and revenues.
Compared with the third quarter of fiscal 2015, SG&A expenses increased 6.6% to $337.5 million. The growth primarily reflected the 10% increase in our store base since the beginning of last year’s third quarter (representing the addition of 14 stores).
In addition, the increase reflected a shift in the timing of advertising expenses related to our new advertising campaign. These expenses were partially offset by a $6.5 million decrease in share-based compensation expense. SG&A per retail unit increased $81 to $2,324.
Compared with last year's third quarter, CAF income increased 2.9% to $92.3 million, driven by an increase in average managed receivables, which was largely offset by a lower total interest margin percentage and an increase in the provision for loan losses.
Average managed receivables grew 15.4% to $9.26 billion. The total interest margin, which reflects the spread between interest and fees charged to consumers and our funding costs, declined to 6.0% of average managed receivables from 6.4% in last year’s third quarter.
During the third quarter, the company opened two stores in existing markets (our sixth store in Houston and our second store in Minneapolis). The company also relocated one store in the Washington, D.C. / Baltimore market. Subsequent to the end of the quarter, the company entered the Boston market with two stores.
During the third quarter, the company repurchased 7.7 million shares of common stock for $445.7 million pursuant to our share repurchase program. As of November 30, 2015, the company had $1.55 billion remaining available for repurchase under the program.
At that date, the company also had $564.0 million outstanding under our $1.2 billion revolving credit facility. The increase in outstanding revolver borrowings during the third quarter was due in large part to our stock repurchase activity and a seasonal increase in inventory. ■