CarMax Salesmanship Shines in Quarter

(Updated for stock movements and additional information about related companies.) RICHMOND, Va. (TheStreet) -- CarMax(KMX), the big used-car retailer, posted strong second-quarter growth compared with a year ago, mostly because business in 2008 was exceptionally lousy.

That was apparently enough to drive top-line growth of 13% in the just-ended period, to $2.08 billion from $1.84 billion a year ago.

Earnings easily bested Wall Street expectations. Excluding a gain of 10 cents a share from writing up the value subordinated bonds in its CarMax Auto Finance unit, the company posted a profit of 36 cents a share. Analysts had been looking for just 18 cents. Including the item, CarMax earned $103 million, or 46 cents a share.

A year earlier, CarMax registered a per-share profit of 14 cents a share, which excludes charges of 8 cents.

Investors cheered the report. Late in Tuesday's regular session, CarMax shares surged nearly 11%, or $2.08, to $21.41, in frantic trading. Volume reached 11.8 million shares, dwarfing the average daily turnover of 2.9 million.

In the accompanying statement, CarMax boss Tom Folliard said, "In part, the sales growth was the result of easier year-over-year comparisons; however, it also reflected improving customer traffic trends and an improvement in sales execution."

But customer traffic, he went on to note, actually declined compared with a year ago, even though traffic has strengthened from the absolute pits of early 2009, on the back, it said, of the cash-for-clunkers program.

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