CarMax Shares Crater As Board Ousts CEO Amid Deepening Used-Car Market Cracks

CarMax shares plunged in the early cash session after the struggling used-car retailer delivered weak preliminary third-quarter results that missed Wall Street expectations, and compounded the blow by announcing the abrupt termination of its chief executive officer.

“We make car buying and selling simple, transparent, and personalized,” Chair of the Board Tom Folliard stated in a press release, adding, “However, our recent results do not reflect that potential and change is needed.”

Folliard was referring to preliminary third-quarter results: earnings per share forecasted between .18 cents and .36 cents, missed the Bloomberg Consensus of .69 cents

• Prelim EPS 18c to 36c, estimate 69c (Bloomberg Consensus)

• Prelim used unit sales in comparable stores -8% to -12%, estimate -3.7%

In addition to the weak preliminary earnings report, the company’s board ousted CEO William D. Nash amid declining revenue…

… and stock collapse. 

The combination of today’s news sent shares tumbling as much as 15%, pushing year-to-date losses to over 57%. Meanwhile, online used-car retailer Carvana has gained more than 50% so far this year.

Are CarMax’s troubles a broader sign that used-car prices could tumble amid worsening consumer sentiment, with lower- and middle-income households increasingly cutting back on restaurant spending?

Let’s not forget that the implosion of subprime auto lender Tricolor Holdings may have been an inflection point…