CarMax Falls on Service Accounting CorrectionNiamh Ring
CarMax Inc., the biggest U.S. auto dealer by market valuation, fell the most in more than three months after correcting its accounting for extended-service and guaranteed-asset-protection products.
The shares dropped 4.2 percent to $45.56 at the close in New York, for the biggest one-day decline since Dec. 20. They have fallen 3.1 percent this year.
CarMax increased the cancellation reserves for the plans, which reduced diluted net earnings per share by 8 cents in the fourth quarter, according to a statement today. The rise reflects the canceling of extended plans prior to the end of their contract term, CarMax said.
The company, which operates 133 used-car superstores in 66 markets, reported a 7 percent rise in same-store sales for the fourth quarter and a 12 percent increase for the fiscal year ended Feb. 28. The gain for the year “was our strongest since fiscal 2002,” Chief Executive Officer Tom Folliard said.
“While the accounting correction related to ESP and GAP reserves had an impact on the fourth quarter, we posted solid earnings growth in fiscal 2014,” he said in the statement.
Net income for the fourth quarter fell 7.5 percent to $99.2 million, or 44 cents a share, from $107.2 million, or 46 cents, a year earlier. Analysts had estimated 54 cents, according to data compiled by Bloomberg. Revenue advanced 8.8 percent $3.08 billion. That compared with a $3.2 billion projection from analysts.
CarMax also said it plans to buy back $1 billion in stock after reporting its biggest annual jump in comparable-store sales in more than a decade.
The board set a share-repurchase plan that expires at the end of next year. The company bought back $306 million in stock in its most recent fiscal year.