CarMax quarterly profit overtakes estimates on cost cuts

(Reuters) -CarMax on Thursday posted a more than two-fold rise in quarterly profit to beat analyst estimates after cost cuts helped it offset lower demand for used vehicles, sending the pre-owned car retailer's shares up 7%.

Used-vehicle demand, which rose during the pandemic, fell significantly over the past few quarters after consumers were faced with higher interest rates.

Additionally, higher inventory levels of used vehicles had led to retailers selling vehicles for heavy discounts, in some cases even lower than the prices they were acquired at.

"We believe vehicle affordability challenges continued to impact our third quarter unit sales performance, with ongoing headwinds due to widespread inflationary pressures, higher interest rates, tightened lending standards and low consumer confidence," CarMax said.

Stephens analyst Daniel Imbro said consumers' affordability headwinds would continue in the next year.

The company last year paused some hiring and reduced expenses as it looked to offset the waning vehicle demand.

However, CarMax said on Thursday it resumed its share repurchase program during the quarter after pausing it last year.

"In addition to the cost management efforts that we've undertaken, we're also going to require the consumer to return with some strength," CarMax finance chief Enrique Mayor-Mora said on a post-earnings call with analysts.

The company's profit jumped to $82 million, or 52 cents per share, in the third quarter ended Nov. 30, from $37.6 million, or 24 cents per share, a year ago.

Analysts on average had expected a profit of 43 cents per share, according to LSEG data.

However, revenue fell 5.5% to $6.15 billion, below estimates of $6.29 billion.

(Reporting by Nathan Gomes in Bengaluru; Editing by Maju Samuel)