© Reuters. FILE PHOTO: The sign of a CarMax dealership is pictured in Duarte, California March 28, 2014. CarMax, the largest U.S. used car retailer, is expected to report strong fourth-quarter results on April 4. REUTERS/Mario Anzuoni
(Reuters) -CarMax Inc on Thursday reported an 86% drop in quarterly profit and the largest U.S. used car retailer announced it was cutting expenses and pausing stock buybacks, as rising interest rates sap consumer confidence.
Shares of the company tumbled 11.5% before the bell and were on track to open at more than two-and-a-half year low, dragging down other auto retailers such as AutoNation Inc (NYSE:) and Carvana Co (NYSE:) .
The auto retail industry has been facing the brunt of consistent rate hikes and weakening consumer confidence. Analysts have been warning that more pain is ahead as a period of bumper earnings comes to an abrupt halt.
“We believe vehicle affordability challenges continued to impact our third-quarter unit sales performance, as headwinds remain due to widespread inflationary pressures, climbing interest rates, and low consumer confidence,” CarMax (NYSE:) said on Thursday.
The company said it slowed car buying in the quarter, adding it was also reducing marketing and capital expenditures to shore up profits, which missed analysts’ 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, as per Refinitiv data.
Revenue was $6.51 billion and came in below the average analyst estimate of $7.29 billion.