Stock trading in Red: CarMax, Inc (NYSE: KMX)

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CarMax, Inc (NYSE: KMX) stock fell 4.13% after the company reported 11.6% increase in the net earnings to $214.9 million. Regarding the company’s business, approximately half of the stores are currently closed or running with limited operations. The company also has a central response team in place, which are developing and implementing plans for multiple scenarios, as this is a dynamic situation, with new store openings and closings daily. For wholesale, approximately one-third of the auction locations are closed due to state mandates, and almost half of the wholesale vehicle sales are now taking place online. KMX has ended FY ’20 with $1.3 billion of unused capacity on the warehouse facilities. This is an amount that could support CAF activity for several months, particularly in the current sales environment. And while the public ABS market is currently disrupted, the company sees the Fed’s recent actions to increase liquidity in the credit markets, including bringing back TALF, as encouraging. Further, at the end of March, the company had approximately $700 million of cash and cash equivalents on hand, which is more than $300 million of unused capacity on the revolving credit facility, and more and $2.5 billion of inventory. The company also owns the real estate and buildings in more than 140 of the locations across the country with a net book value more than of $1.8 billion.

Moreover, the company currently has approximately $2.5 billion of long-term debt, that consists of approximately $1.1 billion outstanding under the revolving credit facility, $800 million of senior notes and term loans, and approximately $535 million in financing obligations, which are mainly related to sale leasebacks on select stores. The company does not have any near-term maturities, and the earliest is in 2023.

Additionally, from the past few weeks, the company has been reducing inventory levels, pausing on most capital expenditures and aligning operating expenses to the state of the business. Prior to the coronavirus, the company had planned to open 13 new stores during fiscal year ’21 and a similar number of stores in fiscal year ’22. The company has now paused on store expansion activity and the remodels until the situation stabilizes.

KMX in the fourth quarter of FY 19 has reported the adjusted earnings per share of $1.13, which is in line with the analysts’ estimates for the adjusted earnings per share of $1.13, according to figures compiled by Thomson Reuters. The company had reported the adjusted revenue growth of 14.8 percent to $4.32 billion in the fourth quarter of FY 19.

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