Shares of CarMax $KMX ( ▼ 4.21% ) fell more than 5% in premarket trading Thursday after the used-car giant reported another quarter of declining vehicle sales, even as earnings came in better than expected. The results underscore how competitive the used-car market has become, with Carvana increasingly closing the gap.
Sales Are Still Moving the Wrong Way
CarMax reported adjusted earnings per share of $0.43, well above Wall Street’s $0.31 estimate. But the market focused less on profits and more on demand. Comparable-store sales fell 9% year over year, matching the weak trend the company had already flagged in November when it abruptly fired longtime CEO Bill Nash.
In raw numbers, CarMax sold 169,557 used vehicles to retail customers in its fiscal third quarter, an 8% decline from a year ago. Management said it plans to lower used-vehicle margins in Q4 in an effort to stimulate demand, a move that could lift unit sales but pressure profitability.
Carvana Is Closing In
Those declining sales matter more because Carvana $CVNA ( ▲ 4.37% ) is catching up fast. Wedbush analysts said in November that they now expect Carvana’s retail sales to surpass CarMax’s by Q4 of 2026, about six months earlier than previously forecast. That expectation is starting to show up in market reaction: while CarMax slid, Carvana shares ticked up about 1% in premarket trading.
The broader takeaway for investors is that CarMax’s scale advantage no longer looks as unassailable as it once did. Even with solid earnings execution, shrinking sales volumes and rising competitive pressure are forcing the company to trade margin for momentum, a balance Wall Street is still unsure about.