Thursday, auto retailer CarMax Inc. (KMX) reported a 72% surge in profit for the fourth quarter from the prior-year period, helped primarily by lower expenses and an income at its auto finance division compared to the year-ago loss, which offset a 28% drop in sales. The company said it is unable to provide earnings or sales outlook for fiscal year 2010, citing the unprecedented declines in traffic and sales and the continuing volatility in the asset-backed securitization markets.

For the fourth quarter, CarMax's net income rose to $37.52 million, or $0.17 per share, from $21.83 million, or $0.10 per share, in the prior-year quarter. On average, 12 analysts polled by Thomson Reuters estimated the company to report earnings of $0.02 per share for the quarter. Analysts' estimates typically exclude special items.

Net sales for the quarter dropped 28% to $1.47 billion from $2.04 billion in the year-ago quarter, and missed analysts' consensus revenue estimate of $1.62 billion.

The company attributed the lower sales for the quarter to a sharp decline in customer traffic compared with the prior year period, in addition to lean inventory levels and a decrease in the percentage of sales financed by its finance division.

The Richmond, Virginia-based company said total used vehicle sales, by far its biggest revenue generator, were down nearly 21%, while total wholesale vehicle sales declined 27% from the year-ago quarter.

The company noted that the decline in wholesale unit sales reflected both the reduction in customer traffic flow and a decrease in its appraisal buy rate. Comparable store used unit sales, which measures results at established locations, declined 26% for the quarter.

Tom Folliard, president and chief executive officer of CarMax said, Once again, the most significant factor affecting our sales was a sharp decline in customer traffic compared with the prior year. We estimate that traffic declined nearly as much as our 26% decrease in comparable store used unit sales, while our conversion rate slipped slightly.

The company's finance division, CarMax Auto Finance, or CAF, reported a net income for the fourth quarter of $27.97 million compared with net loss of $0.96 million in the same period last year. The company made no material adjustments resulting from changes in valuation assumptions during the latest quarter. In the year-ago quarter, CAF results were reduced by unfavorable adjustments and higher funding costs totaling $31.4 million, or $0.09 per share, primarily related to loans originated in previous fiscal periods.

For fiscal year 2009, CarMax's net earnings declined to $59.21 million, or $0.27 per share, from $182.03 million, or $0.83 per share, in the prior year. Analysts expected the company to report earnings for the year of $0.12 per share.

Net sales for the year decreased 15% to $6.97 billion from $8.20 billion a year ago. Wall Street analysts had a consensus revenue estimate for the year of $7.14 billion.

The company's finance division, CAF reported a decline in full-year net income to $15.29 million from $85.9 million in the prior year.

Looking forward, CarMax said it is unable to provide a meaningful projection for sales or earnings for fiscal year 2010 due to unprecedented declines in traffic and sales and the continuing volatility in the asset-backed securitization markets.

However, based on the assumption that sales trends do not improve from fourth-quarter levels and due to the economic uncertainty, the company said it anticipates a double-digit decline in comparable store used unit sales in fiscal 2010, particularly early in the year.

The company projects gross capital expenditures of approximately $20 million in fiscal 2010, down from $185.7 million in fiscal 2009.

KMX closed Wednesday's regular trading session at $12.46, up $0.02 on a volume of 5.87 million shares. The stock has been trading in a range of $5.76-$21.99 in the past 52 weeks.

For comments and feedback: contact editorial@rttnews.com