CarMax saw a 7-percent bump in total used unit sales during the second quarter, and a 5.4 percent increase year to date.

Gross profit per used unit at $2,160 remained consistent with $2,166 in the second quarter of last year.

Meanwhile, wholesale unit sales declined by 1.3 percent in the second quarter, which president and chief executive officer Bill Nash attributed to a calendar issue.

“Compared to the second quarter of last year, we had one less Monday this quarter, and approximately 55 percent of our auctions take place on Mondays,” he said during a conference call with investors. Barring that, he said, he estimated this year’s wholesale vehicle unit sales growth would have been 1.4 percent year-over-year.

“Gross profit per wholesale unit decreased to $870 compared to the gross profit per unit of $951 last second quarter,” Nash continued. “Last year's gross profit per unit was exceptionally strong, so it was a tough comparison.”

CarMax also reported that net sales and operating revenues increased 2.9 percent to $4.00 billion, and that net earnings declined $9.9 million, or 5.7 percent, to $162.4 million, while net earnings per diluted share rose 2.4 percent to $0.84.

Used unit sales in comparable stores increased 3.1 percent, which Nash said was driven by a strong improvement in conversion but was partially offset by a decline in traffic.

“As we discussed last quarter, we believe our decrease in traffic was largely due to the continuation of less traffic from customers at the lower end of the credit spectrum,” he said, noting that used unit comps for non-Tier 3 customers were significantly stronger this quarter at more than 8 percent.

Tom Reedy, vice president and chief financial officer, said that “consistent with recent quarters, we experienced a year-over-year increase in credit applications from customers at the higher end of the credit spectrum and a decline across the lower end.”

As far as that decline, he said CarMax was seeing it on both the application and the approval side, estimating 40 percent and 60 percent, respectively.

Nash noted that as a percentage of sales mix this quarter, zero- to 4-year-old vehicles fell to 76 percent compared to 79 percent last year as a result of higher customer demand for older and less expensive vehicles. 

He reported that CarMax opened three stores during the second quarter: El Paso, Texas and Bristol, Tenn. (new markets) as well as Boston. A fourth store, in Boise, Idaho, was opened subsequent to the end of the second quarter.

Plans are to open five additional stores during the third quarter. Four will be in current markets — Philadelphia, Orlando, and two in San Francisco — with one in Grand Rapids, Mich., a new market.

In total, the company said it plans to have opened 16 stores in the 12 months following Aug. 31.

Nash noted that CarMax had previously run a small test on home delivery. The company is now conducting a larger test in the Charlotte, N.C., market

“Through this test we hope to learn the best ways to further operationalize this offering and deliver our hallmark exceptional customer service experience outside the store,” he said.

During a post-call question-and-answer period, an investor asked whether CarMax is seeing relief on the supply side.

“I think the expectations were that was going to be coming back more in full force at this point and continue on later into next year and in the year after,” Nash said.

“We really haven't seen a big, huge increase in the supply of late-model cars. I think there is some coming out there, but we haven't seen the big increase that I think was originally expected. We think it will come; our external partners being the auctions think they will come later this year into next year and even the year after.”

The same investor asked for speculation on what is driving the acceleration in used-car unit comps.

“First of all, we are encouraged by the overall comps of a little over 3 percent. We are equally encouraged that we got that, even with the headwind that we faced in the tier 3 space. So, again, if you looked at just the non-tier 3 sales, it was really at 8 percent,” Nash responded.

“I think really what you are seeing is the culmination of a bunch of different initiatives and better execution at the store level. I can’t pinpoint it to necessarily one thing that’s driving comps this quarter over last quarter. I think it’s the culmination of some of the strategic initiatives that we have been talking about and I think also just better execution at the store level.”