CarMax to slow growth after seeing sales drop
RICHMOND, Va. -- Used vehicle retailer CarMax Inc. said Wednesday it is reducing staffing levels and will temporarily slow its store growth after seeing a sharp drop in car and truck sales because of high gas prices.
CarMax originally withdrew its fiscal-year sales and earnings guidance in June, after sales dropped beginning Memorial Day weekend. From the Memorial Day weekend through the end of May, CarMax said its same-store sales -- or sales at stores open at least a year -- fell 5 percent.
Those sales continued to fall in June and July, resulting in an average drop of 17 percent for the two months, the company said Wednesday.
As a result, CarMax said it reduced its used vehicle inventory by about 9,500 units during those two months and adjusted the vehicle mix to reflect changes in consumer preferences.
As gas prices have climbed, people have been abandoning once-popular trucks and sport utility vehicles in favor of fuel-efficient small cars. That has driven used truck and SUV values lower.
"Falling vehicle prices and the negative equity it is creating continues to pressure sales trends," RBC Capital Markets analyst Scot Ciccarelli wrote in a note to investors. "Unfortunately for (CarMax), we don't see any reason for a quick turnaround in those trends."
The company, which has more than 16,000 employees, said it has worked to lower its variable store staffing levels, mainly through scheduling and attrition. It also is re-evaluating all open positions and is continuing to focus on controlling overhead expenses.
Layoffs "obviously are our last choice," said spokeswoman Elia Imler.
The company said it expects to open one additional store in the fiscal year that began March 1, bringing it to 10 openings in the current fiscal year. Four originally planned store openings will be pushed back to the following year, when the company plans to open between five and 10 stores.
Source: Detroit News
