RICHMOND, Va. -

CarMax announced Thursday its second quarter results, which revealed increases in operating revenues, sales and net earnings. Company officials also shared that as used supply continues to rise, they expect sales to continue to look up for the used-car retailer.

For the fiscal quarter ending Aug. 31, the company revealed a 7-percent increase in net sales and operating revenues, which climbed from $2.59 billion in the second quarter of 2011 to $2.76 billion in the same period this year.

Furthermore, net earnings rose as well, coming in at $111.6 million, or $0.48 per diluted share, compared with $111.2 million, or $0.48 per diluted share, in the second quarter of fiscal 2012.

Commenting on the results in the company conference call held Thursday, president and chief executive officer Tom Folliard noted, "Traffic was somewhat lower than last year, but conversion increased due to the continuation of better credit offers and strong execution by our sales teams.”

And the company’s  total gross profit increased to $368.0 million from $354.3 million in the second quarter of fiscal 2012, “as increased used-vehicle gross profits more than offset modest reductions in wholesale, new and other gross profit,” officials shared.

Used Sales Growth

Adding to this spike in gross profit were used sales in comparable stores, which increased 5 percent for the quarter, and total used sales rose 8 percent, as well.

“The comparable store used unit growth was driven by improved conversion, which was supported by better credit offers and continued strong in-store execution. The used-vehicle average selling price was similar to the prior year’s quarter,” the company explained.

And used-vehicle gross profit, in particular, climbed 8 percent to $241.8 million, driven by the 8-percent increase in used unit sales.

However, used gross profit per unit remained similar at $2,172 versus $2,178 in last year’s second quarter.

During the company's conference call, Folliard also explained how the rebound in used supply will have a positive impact on sales in the near future.

“We do believe the decrease in supply of used vehicles since 2008 adversely impacted our sales over the last couple years. Assuming our trends continue, we expect to see an improving supply situation, especially in one- to four-year-old cars where we have historically had higher share," Folliard explained.  “We believe that as supply rebounds, it will positively affect our business over the next year or two.”

As for which units were flying of the lots the fastest this Q2, Folliard shared that sales of vehicles five years or older made up above 25 percent of total sales.

And perhaps as a result of spiking gas rates the past few months, the CEO noted that "year-over-year sales of SUVs and trucks fell about 2 percentage points this quarter, and was offset by a similar increase of compact and midsize vehicles sold."

On the other hand, wholesale vehicle sales didn’t fare quite as well as late-model units.

Wholesale vehicle unit sales declined 2 percent compared with last year’s quarter, following increases of 23 percent and 20 percent, respectively, in the second quarters of the two previous fiscal years.

“Appraisal traffic in the current quarter was higher than in the prior year period; however, the appraisal buy rate was lower, which we believe reflected the effect of moderating wholesale vehicle valuations,” the company noted, further explaining the slide in wholesale vehicle sales.

Wholesale gross profit also declined, falling 5 percent to $75.1 million, “reflecting the combination of the 2-percent decrease in wholesale unit sales and a 2-percent reduction in wholesale gross profit per unit to $907 from $929 in the prior year quarter,” officials added.

Commenting on the overall performance for the quarter, Folliard noted, “We are pleased with our improved retail sales in the second quarter, as used unit comps strengthened and we continued to open new stores.

“Net earnings were flat, as the contributions from the growth in retail sales and CAF income were offset by higher SG&A costs, which were pressured by the ramp in our store growth rate, and the tough comparisons in our wholesale operations,” he continued.

CarMax Auto Finance Sees Double-Digit Income Growth

And for the finance arm of the company, the Q2 results were encouraging as CarMax Auto Finance (CAF) income increased 19 percent to $75.7 million from $63.8 million in the prior year quarter.

“The improvement in CAF income was primarily due to the 14-percent increase in average managed receivables, which grew to $5.25 billion from $4.60 billion in last year’s second quarter” the company noted.

“The increase in average managed receivables reflected the growth in CAF origination volume throughout fiscal 2012 and the first half of fiscal 2013 as we transitioned back to a pre-recession origination strategy, as well as higher average selling prices and retail unit sales growth over this period,” they continued.

And the allowance for loan losses increased slightly, to 0.9 percent of managed receivables as of August 31., compared with 0.8 percent last year.

“Low unit charge-offs and strong recovery rates continued to largely offset the effect of the change in credit mix resulting from the transition in origination strategy,” officials concluded.

Plans to Open Doors at New Superstores

On top of the three used-car superstores the company opened during the second quarter of fiscal 2013 — CarMax entered the Ft. Myers, Fla., market with two stores and opened a third store in the Nashville, Tenn., market. — officials revealed it aims to open a total of ten superstores this fiscal year.

Though selling, general and administrative expenses increased 11 percent to $254.7 million from $229.9 million in the prior year’s second quarter, the company noted, “the increase primarily reflected the 8-percent increase in our store base since the beginning of last year’s second quarter (representing the addition of eight stores) and higher growth-related costs resulting from the ramp in our store growth rate.

“Growth-related costs include pre-opening expenses, relocation expenses, and the cost of building and maintaining management bench strength to support future growth. SG&A per retail unit increased to $2,241 versus $2,197 in the prior year’s quarter mainly due to the costs associated with this year’s higher store growth rate,” they concluded.