(Reuters) – Shares of CarMax Inc fell 20% in premarket trading on Thursday after the top U.S. used-car retailer’s second-quarter results were slammed by the impact of rising inflation on consumer spending.
Strong demand for personal transport has led to steady sales of both new and used cars in the United States so far, but rising interest rates and higher car prices are starting to upend that trend.
“We believe a number of macroeconomic factors impacted our second-quarter unit sales performance, such as vehicle affordability challenges that stem from widespread inflationary pressures, as well as climbing interest rates and low consumer confidence,” CarMax said.
Auto research firm Cox Automotive, which tracks U.S. vehicle market trends, on Wednesday cut its forecast for new and used vehicle sales on worsening consumer sentiment.
Consumers are pulling themselves out of the purchase process as rising interest rates and high vehicle prices make monthly payments unaffordable, said Cox Automotive Chief Economist Jonathan Smoke.
CarMax’s quarterly sales and profit miss and bleak commentary were a drag on shares of rivals AutoNation Inc and Lithia & Driveway, both of which fell about 4% each.
CarMax, whose shares were set to open at more than a two-year low on Thursday, reported a profit of 79 cents per share, that fell well below the average analyst estimate of $1.39 per share, as per Refinitiv data.
Revenue was $8.14 billion and came in below the expectation of $8.54 billion, as its sales of retail used units fell 6.4%, while comparable store sales were down 8.3%.
Ford Motor Co’s shares tumbled last week after the automaker said it was experiencing higher inflationary pressures.
The automaker, however, kept its full-year adjusted EBIT forecast even as the overall economic picture darkens.
(Reporting by Priyamvada C in Bengaluru; Editing by Anil D’Silva)
