CarMax Shares Climb as Turnaround Push Shows Green Shoots

(Bloomberg) -- CarMax Inc. shares rose after the company reported comparable used-vehicle sales that expanded more than expected, showing its revival efforts are taking hold even in light of faltering consumer sentiment.

The stock gained as much as 5.9% in premarket trading. Second-quarter sales from locations in operation for at least a year were up 13%, according to a Tuesday statement, surpassing the 5.6% growth analysts had expected. That's after four consecutive quarters of falling same-store sales.

The used-car retailer is making progress in repairing its business after new Chief Executive Officer Keith Barr introduced a four-pillar strategy last quarter and signaled the company would cut prices to bring in more customers.

CarMax plans to resume share buybacks "at a modest level" in the third quarter of the year. It will host a strategic update in November to talk about its new business strategies.

Gross profit generated from used vehicle sales grew for the first time in five quarters, while the company sold more used vehicles in the quarter than analysts projected.

The Virginia-based company's recovery comes amid an environment of higher interest rates, soaring pump prices and weaker consumer sentiment, which analysts feared would deter potential buyers from big-ticket purchases like vehicles.

Read: CarMax's Revival May Hit Roadblock as US Consumer Falters

CarMax's turnaround efforts have sent stock 46% higher this year through Monday's close, surpassing the S&P Small Cap 600 Index's 14% increase.

While CarMax is benefiting from a firmer used-car retail environment and operational improvements, more evidence is needed to validate its turnaround, JPMorgan analyst Rajat Gupta, who has a hold rating on the stock, wrote in a note ahead of earnings.