CarMax poised to start growing again
Automotive retailer CarMax Inc., which put the brakes on opening new stores during the height of the recession, is poised for steady growth in the future, its top executive said.
"The best part of our story is our growth potential," Tom Folliard, the chain's president and CEO, told shareholders at the company's annual meeting Monday. "It was the best part of our story before the recession and it is the best thing about us today. Now we are building back up our infrastructure to start growing again."
The Goochland County-based chain, which finished its fiscal year Feb. 28 with a healthy balance sheet and stronger sales, resumed growth last year by opening three stores. It plans to open five stores this year — two have already opened — and eight to 10 stores next year.
"We haven't talked much about growth after that," Folliard said.
CarMax stores reach about 48 percent of the U.S. population, he said. With nearly $9 billion in annual revenue, the chain has less than a 3 percent share of the highly fragmented used-car market.
The company, he said, has growth potential in new and existing markets.
The chain, founded in 1993 with a store on West Broad Street in Henrico County, operates 105 stores in 51 markets. It sold 396,181 used cars last year — and more than 3 million since opening the first lot.
A shareholder asked whether CarMax plans to grow internationally. Folliard said that "until we get a bigger footprint in the U.S., I don't think we're ready to look at international."
Folliard said the company is focused on continuous improvements to its concept, its operations and the look of its stores. During the economic downturn, CarMax worked on lowering expenses and improving profit margins.
CarMax has a team working on coming up with a new look and operation of a store, which it calls the Next Generation project. Folliard said he hopes the new store would open next year.
"We hired an outside firm to take a critical look at how our customers view us and to make the existing box much, much better," Folliard said. "It is another evolution for us to continuously improve our business."
One area that the chain has adapted over the years is its wholesale auto auction operations. Wholesale unit sales at CarMax grew 33 percent last year, compared with a 10 percent growth of comparable store used unit sales.
That pace of sales growth in the wholesale operations continues this year, he said.
Wholesale operations also generated 16 percent of the company's gross profit, while the sales of used cars at its stores generated 56 percent.
Copyright Richmond Times-Dispatch. Used by permission.
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