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(Reuters) -Used-car retailer CarMax Inc (NYSE:KMX) said on Thursday it was pausing share repurchases and cutting expenses after reporting an 86% drop in third-quarter profit as the industry struggles to offload inventory amid waning demand.
The company’s shares fell as much as 12% to $52.10 and were at more than a two-and-a-half year low, dragging other auto retailers down with it.
The used-car industry, which minted money during the pandemic, is now struggling to sell cars as consistent rate hikes and decades-high inflation take a toll on demand.
“CarMax is battling a used-vehicle recession,” Evercore ISI analyst Michael Montani said, adding that pressure on wholesale sales intensified from the second quarter.
In response to challenging industry conditions, CarMax said it slowed car buying in the third quarter and cut marketing and capital expenditures.
The company also halted share buybacks, but added it remains committed to returning capital back to shareholders over time.
CarMax’s retail and wholesale used-vehicle unit sales were 298,807 in the reported quarter, down 28% from a year earlier.
Average selling prices of retail used vehicles rose about 2%, while those of wholesale used vehicles fell 6%.
CarMax said it bought about 40% fewer vehicles in the third quarter to cut costs.
The company reported net income of 24 cents per share, compared with estimates of 70 cents, according to Refinitiv data.
CarMax posted revenue of $6.51 billion, below estimates of $7.29 billion.
Shares of other car retailers such as AutoNation Inc (NYSE:AN) and Carvana Co (NYSE:CVNA) were down about 4%.
