CarMax reported results for the first quarter ended May 31, 2016. Total used vehicle unit sales grew 4% and comparable store used unit sales rose 0.2% versus the prior year’s Q1.
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The comparable store sales performance reflected the combination of an improvement in conversion that more than offset a decrease in store traffic. company's sales performance included a reduction in the Tier 3 sales mix to 11.9% of used unit sales from 14.7% in the prior year’s first quarter.
Tier 3 sales represent those financed by company's Tier 3 third-party finance providers, those to whom the company pay a fee, and those in CAF’s Tier 3 loan origination program. For the non-Tier 3 customer base, comparable store used unit sales rose 3.6%.
Wholesale vehicle unit sales grew 1.8% versus the first quarter of fiscal 2016, primarily driven by the growth in company's store base.
Other sales and revenues declined 10.9% year-over-year, primarily reflecting a decrease in new vehicle sales (which are now included in other sales and revenues) due to the disposal of two of company's four new car franchises during fiscal 2016.
Extended protection plan (EPP) revenues increased 6.3%, largely reflecting improved margins and the growth in company's used unit sales. Net third-party finance fees improved by 29.8%, primarily due to the reduced proportion of company's sales attributable to Tier 3 finance providers.
Total gross profit increased 5.3% versus last year’s first quarter, to $572.6 million. Used vehicle gross profit rose 4.1%, driven by the 4.0% increase in total used unit sales.
Used vehicle gross profit per unit was consistent at $2,202 versus $2,200 in the prior year period. Wholesale vehicle gross profit declined 1.9% versus the prior year’s quarter, as the 1.8% increase in wholesale unit sales was offset by a decrease in wholesale vehicle gross profit per unit to $995 from $1,032.
Other gross profit rose 20.9%, primarily reflecting the improvements in EPP revenues and net third-party finance fees. The decrease in new vehicle sales did not significantly affect other gross profit.
Compared with the first quarter of fiscal 2016, SG&A expenses increased 8.7% to $380.2 million. The growth primarily reflected the 11% increase in company's store base since the beginning of last year’s first quarter (representing the addition of 16 stores), as well as a $7.0 million increase in share-based compensation expense.
SG&A per used unit was $2,223 in the current quarter, up $97 year-over-year, of which $36 was attributable to the higher share-based compensation expense.
Compared with last year’s first quarter, CAF income declined 7.7% to $100.8 million.
Interest expense rose to $11.1 million in the first quarter of fiscal 2017 from $7.1 million in the prior year’s quarter. ■