CarMax reported Q4 FY2025 with solid top-line momentum and meaningful gross profit expansion, but the quarter carried a negative operating income due to non-recurring impairment and ongoing investment in growth initiatives. Revenue reached $6.00 billion, up 6.7% year over year, while gross profit rose 28.2% to $668 million, underscoring better per-unit margins and higher volume. Despite the improvement in gross profitability, the company posted an operating loss of $99.6 million, reflecting SG&A deleveraging on higher compensation and timing-driven advertising; management emphasized ongoing efficiency gains and cost controls as key drivers behind the earnings momentum.
Management highlighted the durability of the omni-channel model and the acceleration of CarMax Auto Finance (CAF) within a full credit spectrum. CAF delivered income of $159 million, up 8% year over year, with net interest margin at 6.2% and a CAP strategy anchored by the expansion into Tier 2/3 origination and non-prime securitization. While near-term credit costs are expected to rise—the company forecast a larger provision in Q1 due to seasonality and the ongoing mix shift—the longer-term framework anticipates meaningful earnings expansion driven by higher CAF penetration, EPP enhancements, and continued SG&A efficiency. The company also announced capex of roughly $575 million for FY2026, six new stores, and four stand-alone reconditioning/auction centers, signaling a continued investment in capacity to support mid-single-digit unit growth and mid-to-high-teens EPS growth over the medium term.
Overall, CarMax remains well-positioned to gain market share via its integrated digital tools, augmented sourcing capabilities (MAX Offer), and a scalable CAF program, even as it navigates near-term provisioning pressures and macro uncertainty. The stock trades with a strong earnings-power narrative but faces execution risk and balance-sheet leverage that investors should monitor as the company progresses through FY2026.