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CarMax Inc (NYSE:KMX) has reportedly initiated marketing for a $1.25 billion bond sale shortly after falling short of analysts’ predictions in fourth-quarter earnings.
The auto retailer intends to sell the debt through an asset-backed securities offering that might increase to $1.6 billion, according to a report from Bloomberg.
Mitsubishi UFJ Financial Group is organizing the deal, expected to be formally announced next week, the report added.
CarMax shares plummeted significantly, attributed to profits below Wall Street’s expectations.
The company reported earnings per share of 32 cents, notably lower than the consensus estimate. The drop is attributed to potential buyers’ hesitation due to high monthly payments, reflecting concerns about vehicle affordability.
KMX said vehicle affordability challenges continued to impact fourth-quarter unit sales performance, as headwinds remained due to widespread inflationary pressures, higher interest rates, tightening lending standards, and low consumer confidence.
Despite the earnings setback, CarMax’s move into the ABS market is not unprecedented, as per the report.
In January, it raised $1.55 billion through an ABS offering supported by prime auto loans. Since 2014, CarMax has amassed over $54 billion in ABS sales, as per the data compiled by Bloomberg.
Price Action: KMX shares closed lower by 9.23% at $71.98 on Thursday.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
Posted In: KMX
