CarMax encyclopedia topics

Concept

The concept for CarMax was developed by Circuit City executives under then-CEO Richard L. Sharp for nearly a year in 1991 using the code name "Project X" and was also known as "Honest Rick's Used Cars" to those intimately involved in the planning. The concept was actually first proposed by a consultant hired by Circuit City to evaluate possible business opportunities beyond the scope of their consumer electronics locations.

While used cars has always been the main business, CarMax purchased the rights to locations from car manufactures such as Chrysler, Jeep, Mitsubishi and Toyota. CarMax also purchased an Auto Mall in Kenosha, Wisconsin that had additional manufacturer franchises, such as Ford, BMW and Volvo.

CarMax initially began with no fees. The concept was abandoned after it was determined that customers were not concerned about paying transaction fees for the purchase of a vehicle.

The typical CarMax store is approximately 59,000 square feet, carries an inventory of 300–400 vehicles, and turns its inventory over eight to ten times a year. On average, a CarMax location employs 40 sales associates.

On average, a purchased vehicle has 12 hours of work done to it before being put up for sale. Each car gets a 30-day warranty and a five-day free return policy.

Sales and revenues

The first CarMax used car auto superstore was opened in September 1993, 1.7 miles from Circuit City's corporate offices in Richmond, Virginia. As of April 17, 2008, CarMax operated 93 used car superstores and seven new car franchises, all of which are integrated or co-located with its used car superstores.

Circuit City issued the first CarMax stock in February 1997, when CarMax had seven locations. Initially the stock was a tracking stock still under the umbrella of the Circuit City; CarMax officially split from Circuit City as of October 1, 2002, when it was spun off as a stock dividend for Circuit City shareholders, with shares also issued to those holding CarMax tracking stock.

During the 12-month period ending February 29, 2008, the company sold 377,244 used cars. CarMax trails Fort Lauderdale, Florida-based competitor AutoNation Inc. in total car retail sales, but CarMax holds a larger used-car operation.

According to the CarMax fiscal year 2009 expectations released on April 2, 2008, the company plans to open 14 used car superstores as well as opening 2 additional car buying centers.

In 2008 it was reported that many CarMax executives exercised and sold large amounts of stock prior to the announcement of earnings. This sale was out of character for the Company since very rarely have the executives sold any of their holdings. The timing of the sales preceded a tremendous drop in share price due to extremely poor first quarter earnings leading to speculation that Executives sold with the knowledge of the poor earnings announcement. An investigation has now resulted in regards to these questionable actions.

Below is a report from the Financial Stock News on June 18, 2008.

CarMax (NYSE: KMX) reported sharply lower first quarter earnings of 13 cents per share compared with 30 cents per share last year prompting the used car retailer to suspend its full year earnings and sales guidance. The stock price tumbled $2.00 to close at $16.34.

Awards

CarMax has been named "America's Most Admired Company in Automotive Retailing" by Fortune magazine, It also was on Fortune's "100 Best Companies to Work For" list in 2005 (#87), 2006 (#93), 2007 (#88), and 2008 (#46).