Why CarMax (KMX) Shares Are Falling Today

Carmax (NYSE:KMX) shares declined 23.4% after the company reported significantly missed third-quarter 2025 results, with earnings per share of $0.64 falling well below the $1.03 estimate and revenue of $6.59 billion missing the $7.07 billion consensus. The poor performance, driven by weakening demand and a 7.1% drop in same-store sales, also saw operating margins decline to 1.8%, extending a pattern of macroeconomic challenges that previously led to the suspension of long-term growth guidance.

Analysis

Carmax (KMX) is facing significant operational and financial headwinds, as evidenced by its third-quarter 2025 results that severely missed analyst expectations. The company reported earnings of $0.64 per share, falling 37.9% short of the $1.03 consensus, while revenue of $6.59 billion was 6.8% below the anticipated $7.07 billion. This underperformance is directly linked to deteriorating fundamentals, including a 7.1% decline in same-store sales, which points to weakening consumer demand. Profitability has also eroded, with the operating margin contracting to 1.8% from 2.9% a year prior. This event is not an isolated incident but part of a persistent negative trend; six months earlier, the company reported a significant Q1 miss and suspended its long-term growth guidance, citing macroeconomic uncertainty. The market's reaction, a 23.4% single-day stock decline, underscores the severity of the report, contributing to a 44.1% year-to-date loss and placing the stock 49.1% below its 52-week high. The pattern of missing estimates and the prior suspension of guidance signals deep-seated challenges and a lack of management visibility into the near-term business trajectory.

Key Decisions for Investors

• Investors should recognize the significant fundamental deterioration, evidenced by consecutive earnings misses, declining same-store sales, and compressing margins, which heightens the risk profile for existing long positions.
• The lack of long-term guidance from management remains a critical red flag, and any new investment should be predicated on a clear turnaround in consumer demand or a positive revision to the company's outlook.
• Given the stock's severe underperformance and the market's strong negative reaction, investors should be cautious of a potential value trap and await signs of fundamental stabilization before considering an entry, as momentum remains decidedly bearish.