© Reuters. FILE PHOTO: CarMax dealer signs are pictured in Duarte, California March 28, 2014. CarMax, the largest used-car retailer in the United States, is expected to report possible fourth-quarter results. on April 4. REUTERS/Mario Anzuoni
(Reuters) -CarMax Inc on Thursday reported an 86% drop in quarterly profit and the largest US used-car retailer announced it was cutting costs and halting stock buybacks, As interest rates rise, consumer confidence is lost.
The company’s shares were down 11.5% before the bell and were on track to open at their lowest levels in more than two and a half years, trailing other auto retailers like AutoNation Inc (NYSE:) and carvana Copper (NYSE:) .
The auto retail industry has faced the brunt of continued interest rate hikes and undermining consumer confidence. Analysts have warned that there will be more trouble ahead as the period of bumper earnings abruptly comes to a halt.
“We believe vehicle affordability challenges continue to weigh on our third-quarter sales performance, as headwinds remain due to widespread inflationary pressures, interest rates escalating and consumer confidence is low,” CarMax (NYSE:) said on Thursday.
The company said it reduced auto purchases in the quarter, while reducing marketing and capital costs to boost profits, which fell short of analyst expectations in the third quarter.
CarMax reported net income of 24 cents per share for the quarter through November, compared with expectations of 70 cents, according to Refinitiv data.
Revenue was $6.51 billion and below analysts’ average estimate of $7.29 billion.
