10:48 AM EDT, 09/25/2025 (MT Newswires) -- CarMax ( KMX ) shares fell in Thursday trading after the used-vehicle retailer reported an unexpected drop in profit and sales for its fiscal second quarter.

Earnings for the quarter ended Aug. 31 fell to $0.64 per share from $0.85 a year earlier, missing the FactSet-polled consensus for an increase to $1.04. Sales and operating revenue declined 6% to $6.59 billion, while analysts expected the top line to be flat year over year.

The stock was down about 22% in Thursday trading.

The company saw higher sales volume in March and April due to tariff speculation, pulling demand forward and leaving excess inventory ahead of the second quarter, Chief Executive Bill Nash told analysts on a call, according to a FactSet transcript. The inventory buildup resulted in a "depreciation" that "negatively impacted our price competitiveness and our sales," he said.

"In the second quarter, we responded by lowering retail margin to drive sell through, and we intentionally slowed buys to balance our inventory with sales," Nash added.

Retail used-vehicle sales fell 7.2% to $5.27 billion, while wholesale used-vehicle revenue was down 0.4% to $1.15 billion. Both metrics slipped due to a decrease in units sold. Comparable-store sales in the retail unit dropped 6.3%.

Retail used unit sales were down 5.4% to 199,729 vehicles, while wholesale volume declined 2.2% to 138,302 vehicles. CarMax ( KMX ) bought 293,000 vehicles in the second quarter, down 2.4% on an annual basis. It bought 262,000 vehicles from customers and 31,000 from dealers.

"While our second-quarter results fell short of our expectations, we remain focused on driving sales, gaining market share and delivering significant year over year earnings growth for years to come," Nash told analysts.

CarMax ( KMX ) underperformed on all key metrics, and the results increased investor concerns "primarily around management's ability to sustain market leadership and drive additional growth through financing penetration and the expansion into lower-tier lending," Wedbush Securities said in a note.

"The narrative has turned cautious, and we believe (CarMax ( KMX )) is now losing share at an accelerating pace relative to its closest competitor," Wedbush analysts, including Scott Devitt, wrote.

The brokerage downgraded the stock to neutral from outperform and lowered its price target to $54 from $84.

Price: 43.93, Change: -13.12, Percent Change: -23.00