Important Note: Placer.ai Updated Their Methodology – Visits Trend is Very Similar, but Absolute YY Change Values Different from Before. Easter Shift Impacting RoC This Week.
Industry: Our aggregate visits data saw an overall deceleration in this week’s update, which was partially impacted by the Easter shift. Trend still positive and visit compares easing with tax refunds looking significantly positive over the past few weeks. Consumers likely feeling some excess spending ability, pushing the likes of Redbook Retail Comp Sales higher. But… CPI came in “hot” yesterday (we’ve been of the belief that accelerating inflation would return and that rate cuts would not occur in ’24 for quite some time now). So, we think higher for longer remains (despite Biden’s commentary re rate cuts later this year). Hard to know where we are heading with the data and Fed/Govt leaders in contradiction.
- Notable Industry Callouts: Various accelerations and decelerations caused by Easter shift impact.
Company Callouts:
- CarMax (KMX): EPS Miss and Pushes Out LT Target—Stay Short Auto Retail (CVNA, LAD, KMX, SAH) | Visits Look Across the Space. Short Bias name KMX posted Q4 EPS of $0.32 vs the street estimate of $0.46 and revenue of $5.63B vs $5.78B. Rate of Change on the used side actually improved, with revenue accelerating from -8.3% YY in Q3 to -0.7% YY in Q4, comps from -4.1% to +0.1%, units from -2.9% to +1.3%, and ASP from -4.6% to -2.3%. This improvement was clearly not enough, though, given the elevated valuation relative to peers and the fact that Used Gross Profit per Unit (GPU) fell from +2% YY last Q to -1% YY this Q. KMX also pushed out its long term target of 2M combined retail and wholesale units and $33B annual revenue to FY26-FY30 due to “uncertainty in the timing of market recovery and as [it continues] to focus on profitable market share growth.” The stock is justifiably getting hammered. Used prices still need to come down significantly, demand will continue to be under pressure due to low affordability from the higher for longer dynamic, and P&Ls will see pressure from increased interest expense on company ABS portfolios (at the likes of KMX, LAD, and potentially CVNA). Visits at KMX look weak, especially as it is posting negative visits YY on a negative visit comparison. Visits compares get more difficult in the back half of the year and we may no longer get a rate cut, so we expect to see the data weaken as the year progresses. We are staying short Auto Retail in aggregate here.
Chart List:
- Industry
- Companies
Source: Placer.ai
