CarMax, the largest used-auto retailer, reported its fiscal second-quarter 2027 results, covering the three months ending August 31, 2026. While the company's revenue of approximately $6.97 billion missed Wall Street's consensus, earnings per diluted share were approximately $0.72, an improvement from $0.64 in the prior-year quarter. This report comes as investors evaluate CarMax's turnaround strategy, which focuses on competitive pricing, digital investments, and aggressive cost reduction to achieve margin recovery.
Investors have shown confidence in CarMax's strategic pivot under CEO Keith Barr, with KMX shares advancing approximately 47% year-to-date, trading near $57. This significantly outperforms the S&P 500's 13% gain over the same period. In contrast, competitors like AutoNation, Asbury Automotive, Carvana, and Group 1 Automotive have seen sharp declines in their share prices year-to-date. This suggests that CarMax's gains are driven by sector-specific belief in its reset rather than broader market tailwinds.
A key component of the turnaround plan is headcount management. CarMax eliminated approximately 145 corporate positions, 4% of its corporate workforce, on September 21, 2026. This was the third reduction in eleven months, following cuts of 350 employees in October 2025 and 230 in January 2026. These reductions contribute to CEO Barr's commitment to achieving $200 million in annualized selling, general, and administrative (SG&A) savings by the end of fiscal 2027. Management has emphasized that structural headcount reduction is the primary driver towards this cost target.
Analyst sentiment currently leans towards a "hold" rating, with 15 hold ratings versus three buys, and an average price target of $59.33. This reflects the view that much of the recoverable value has been priced in, making the stock sensitive to any slowdown in gross profit per retail used unit normalization or CarMax Auto Finance (CAF) credit stabilization. The market is closely watching the pace and visibility of Barr's clear framework—competitive pricing, a simplified digital experience integrated with in-store operations, and a structurally lower SG&A base—rather than just quarterly surprises. The next quarterly report is scheduled for December 2026.
The broader automotive industry faces challenges, including higher interest rates, elevated fuel prices, and growing consumer caution. Used-car prices averaged $27,240 in August, the highest since December 2022. Despite these headwinds, CarMax's leadership is focused on improving the digital car shopping experience, which CEO Barr acknowledged was too complex and not seamlessly connected to in-person operations. He stated that the company knows what needs to change and is moving with urgency.
