CarMax is going back to basics heading into 2026, with short-term plans to cut prices and margins, boost marketing and move the metal.
“Our average selling prices have drifted upward and appear to be less attractive to customers,” said David McCreight, interim president and CEO, in the question-and-answer portion of an earnings conference call on Dec. 18.
Cutting average selling price is key to CarMax’s ambition to increase unit sales, but that doesn’t mean cutting all prices across the board by the same amount, said Interim Executive Chair Tom Folliard.
“When we say we’re at a lower price by $100 or $200, it doesn’t mean we’re taking $100 across the board on cars,” Folliard said. “It‘s more like if we say $100, a percentage of our cars is $1,000. Or 5% of our cars are $500. So it does meaningfully impact the trajectory of sales because of the way we execute price changes.”
Folliard added the company’s “near-term priority is to get things turned around and get sales moving in the other direction.”
At the same time, CarMax is balancing some cost cuts with increased spend in other areas, like marketing.
“To ensure that CarMax is a preferred choice, we will work to shrink the gap between our offering and the marketplace,” McCreight said. “We are lowering margins and supporting this action with marketing spend, while also building out more effective ways to communicate our value to the consumer.”
Despite increasing marketing spend, he said CarMax is cutting costs overall, with a goal of cutting selling, general and administrative expenses by $150 million per year.
CarMax reported SG&A expenses for the third fiscal quarter of $581.4 million. That represented 98.5% of gross profit, up from 85% a year earlier, driven by a decline in gross profit.
In the conference call, CarMax reviewed results for the third quarter of its 2026 fiscal year, which ended Nov. 30. Net sales and operating revenues were $5.8 billion, down 6.9% vs. the same quarter a year ago. Net earnings were down 50.4%, to $62.2 million.
CarMax used-vehicle unit sales were 169,557 in the third fiscal quarter, down 8% vs. a year ago. The average used-vehicle selling price at CarMax was $26,383, up 0.9% vs. a year ago.
CarMax announced high-level leadership changes in November. The company on Sept. 25 announced poor results for its second fiscal quarter, which ended Aug. 31. In the second fiscal quarter, net sales and operating revenues were $6.6 billion, down 6% vs. a year ago. Net earnings were $95.4 million, down 28.2% vs. a year ago.
CarMax announced Nov. 6 that then-CEO Bill Nash would step down from that position and from board membership. He joined CarMax in 1997 and had been president and CEO since September 2016.
Also on Nov. 6, the company launched a search for a permanent CEO and named McCreight, who was already a board member, interim president and CEO. McCreight has taken responsibility for day-to-day operations. He has been a CarMax board member for seven years. In his career, he has led several brands in the retail fashion industry, including Lulu’s, Urban Outfitters and Anthropologie.
Folliard, then-board chair, was named interim executive chair. All those changes took effect Dec. 1.
“Recent results have been unacceptable and do not reflect the company’s potential,” Folliard said in the Dec. 18 conference call. Folliard has a 30-year history with the company, including as CEO from 2006 to 2016.
