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    Is CarMax (KMX) Rewriting Its Growth Story With Bigger Cost Cuts and New Stores?

    Simply Wall St·05/19/2026 17:43:19
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    • In May 2026, CarMax reported quarterly results that beat earnings expectations but showed lower profitability year over year, while also increasing its targeted selling, general and administrative savings to US$200 million by the end of fiscal 2027 and outlining plans to open four new stores plus additional auction and reconditioning centers.
    • This combination of softer retail margins, a larger cost-cutting goal and continued physical expansion offers a clearer view of how CarMax is trying to balance growth with efficiency.
    • We’ll now examine how CarMax’s higher SG&A reduction target and continued store expansion affect the company’s existing investment narrative.

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    CarMax Investment Narrative Recap

    To own CarMax, you need to believe its omnichannel used car model and national footprint can still create value despite recent margin pressure, uneven earnings and a heavy store base. The latest quarter, with weaker profitability but a higher SG&A savings target and fresh expansion plans, sharpens the near term catalyst around cost efficiency, while reinforcing the key risk that fixed costs and softer retail margins could weigh on returns if sales volumes do not cooperate. Overall, this news does not fundamentally alter that trade off.

    The most relevant new data point here is CarMax’s plan to reach US$200 million in exit rate SG&A savings by the end of fiscal 2027, alongside four additional stores and more auction and reconditioning capacity. That mix of cost focus and continued buildout directly connects to the existing catalysts of operational efficiency and physical expansion, but it also heightens the risk that higher fixed costs become a drag if wholesale and retail unit economics remain under pressure.

    Yet beneath these efforts to cut SG&A and expand the footprint, investors should also be aware that...

    Read the full narrative on CarMax (it's free!)

    CarMax's narrative projects $29.8 billion revenue and $919.9 million earnings by 2028. This requires 1.3% yearly revenue growth and about a $361 million earnings increase from $558.5 million today.

    Uncover how CarMax's forecasts yield a $38.31 fair value, a 3% upside to its current price.

    Exploring Other Perspectives

    KMX 1-Year Stock Price Chart
    KMX 1-Year Stock Price Chart

    Before this earnings miss and SG&A reset, the most optimistic analysts were penciling in roughly US$27.6 billion of revenue and US$755 million of earnings by 2029, so if you believed their view that digital investments would steadily expand margins, this latest reminder of weaker profitability and high fixed costs could either test that optimism or prompt you to revisit how much weight you put on those projections.

    Explore 5 other fair value estimates on CarMax - why the stock might be worth 49% less than the current price!

    Reach Your Own Conclusion

    Disagree with existing narratives? Extraordinary investment returns rarely come from following the herd, so go with your instincts.

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    This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.