The Story
On September 29, 2026, CarMax reported results for its fiscal second quarter, which ended August 31. The nation’s largest used-car retailer sold 227,391 retail used vehicles, up 13.8% from a year earlier, and comparable-store used unit sales rose 13.0%. It made less on each one: gross profit per retail used unit fell $111, to $2,105. Even so, total retail used-vehicle gross profit rose 8.1%, to $478.6 million. CarMax said the lower per-car profit reflected “the continuation of pricing actions implemented to support an improved sales trend.”
The push didn’t pay off at first. Keith Barr became CEO in March, and in June, in his first quarter, per-car retail profit fell $230 from a record a year earlier while retail unit sales were roughly flat. The stock fell 9% that day. Management told analysts that this quarter the company paid for sharper prices by cutting reconditioning costs, improving its pricing algorithms with more local market data, and moving from a 90-day to a 30-day warranty, then passing the savings on to customers. The company now expects full-year retail profit per car to fall by less than the $200 it had forecast.
The rest of the quarter improved too. Revenue rose 19.5%, to $7.9 billion, and diluted earnings per share rose 81%, to $1.16. Selling, general, and administrative costs per vehicle fell 8.8%. CarMax plans to restart share buybacks this quarter. Elizabeth Dirgins starts today, October 5, in a newly created role, chief digital and customer officer. A strategy update is scheduled for November 3.
Two details keep this from being a simple win. In wholesale, the auction business for cars CarMax doesn’t sell on its lots, units rose 15.9% but profit per car fell $135, so wholesale gross profit was basically flat at $137.6 million. And CFO Enrique Mayor-Mora said only about half of the comparable-sales gain came from CarMax’s own moves. The other half came from Federal Trade Commission enforcement that pushes dealers to include fees in their advertised prices, which makes CarMax’s long-standing no-haggle prices easier to compare.
The Lesson
Run the numbers from CarMax’s release. At last year’s profit per car of $2,216, the 27,662 extra retail cars were worth about $61.3 million. Earning $111 less on all 227,391 cars cost about $25.2 million. The difference, about $36 million, matches the reported increase almost exactly. Giving up 5% of per-unit margin needed only about 5% more volume to break even, and CarMax got almost 14%.
Wholesale is the warning. The same move there added volume that only replaced the lost margin. A price cut is not good or bad in itself. It depends on how strongly buyers respond in that channel, and that can differ even inside one company.
The quality of the funding matters too. A discount that comes out of margin alone is a one-time gift that competitors can match. A discount paid for by lower costs, such as faster reconditioning, a shorter warranty, or better pricing tools, can be repeated. That is why Barr says that, starting next fiscal year, he wants to “self-fund” price competitiveness instead of cutting per-car profit again.
How to Use It
Calculate the break-even volume before you discount. Divide your current unit margin by the new one and subtract one. That is the minimum volume lift you need. If you can’t realistically clear it, don’t cut.
Measure by channel, not in total. CarMax’s retail cut created profit, while its wholesale cut only broke even. Track how each product, region, or customer segment responds on its own so your winners don’t hide your losers.
Find the cost savings before you give away margin. List the process, warranty, or sourcing savings that will pay for the lower price. If the discount relies only on accepting lower margins, treat it as a temporary experiment with an end date.
Separate your results from tailwinds. CarMax credits about half its sales gain to a regulatory change it didn’t create. When you report on a pricing move, estimate how much came from outside help, because that part won’t repeat on its own.
Sources
CarMax, Inc., “CarMax Reports Second Quarter Fiscal 2027 Results,” press release (Exhibit 99.1 to Form 8-K, SEC EDGAR), September 29, 2026. https://www.sec.gov/Archives/edgar/data/1170010/000117001026000102/q2fy27earningsrelease.htm
CarMax Investor Relations, “CarMax Reports Second Quarter Fiscal 2027 Results,” press release, September 29, 2026. https://investors.carmax.com/news-and-events/news/news-details/2026/CarMax-Reports-Second-Quarter-Fiscal-2027-Results/default.aspx
The Motley Fool, “CarMax (KMX) Q2 2027 Earnings Call Transcript,” earnings call transcript, September 29, 2026 (posted September 30, 2026). https://www.fool.com/earnings/call-transcripts/2026/09/30/carmax-kmx-q2-2027-earnings-call-transcript/
CarMax, Inc., “CarMax Reports First Quarter Fiscal 2027 Results,” press release, June 17, 2026. https://media.carmax.com/press-releases/news-release/2026/CarMax-Reports-First-Quarter-Fiscal-2027-Results/default.aspx
CNBC, “CarMax shares fall after used car retailer reports earnings beats, CEO details turnaround plan,” news article, June 17, 2026. https://www.cnbc.com/2026/06/17/carmax-kmx-q1-earnings.html