CarMax 4Q14 Earnings Call Notes

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Increased share of used vehicle market by 5%

“”Our data indicates, that for the calendar year 2014, we increased our share of the zero to 10 year old used vehicle market by approximately 5%.”

Refreshes don’t really change much operationally, but better experience for customers

“I think we completed three or four of these types of conversions, and they’re a little bit more expensive than the money that would have been spent. So we just thought we would call it out, and we plan to do another 17 this year. In terms of operational changes, it doesn’t change much operationally, but I think it provides a better experience for our customers, and a better working environment for our associates as well. So we have been pretty pleased with what we have done so far, and we will gauge the results going forward, and see how much more aggressively we want to spend.”

Advertising spending

“We are making a lot of changes, and we are evaluating how best to spend our money, but that will be an ongoing process for us. So continued strong effort on TV, we are pretty much out of print, and have been for a long time, and continuing to try to optimize our paid search, as well as trying to improve our SEO, our search engine optimization through organic search.”

Our lending partners have historically allocated more capacity to carmax because they like the transparency of value

“historically, we believe that our partners have opted to direct volume towards CarMax, at the expense of other places, because they like the origination channel, the clarity of information and the knowledge about what the asset is really worth, etcetera. So we have observed in tough times before, that we felt we were less impacted than other folks. Who knows what that means going forward, but that’s probably as much color as I can give you.’

Employ a lot of data

“we employ a lot of use of data, and the ability to deliver that data back to our employees. At the moment, they need it to make good decisions. We have lots of ability to track customers through the process and make future decisions based on that. So I think we have done a pretty good job of utilizing technology in our stores, so that our associates can deliver a great customer experience.”

Cars have always been sold p2p

“You know, we look at every part of competition, and in terms of peer-to-peer, one thing to remember is, that is a huge chunk of the market already and always has been. About a third of all cars sold in the U.S. are sold from consumer to consumer. Whether you sell a car by putting a sign in your yard or you list it online or you just put it in the newspaper or whatever you do. So that has always been a third.”

You don’t lose a sale when it’s cold it just gets deferred

“we never like to use weather as an excuse, but it was really cold, and we did have a lot of stores closed, particularly in the back half of February. As far as attributing sales loss, we generally think we get it back, because when we are closed, everybody else is closed. Its not like milk, if you didn’t sell it, you didn’t sell it, or a grocer. Its such an infrequent purchase, where if we are closed, generally all the competition is closed as well. So I can attributed a specific sales loss to it, but we probably would have done a little better, if it wasn’t so cold”