CarMax filed a securities class action on November 9, 2025, on behalf of investors who purchased the company’s shares between June 20 and September 24, 2025. The lawsuit alleges that CarMax overstated its growth prospects, claiming that early 2026 growth was a temporary benefit from customers buying cars ahead of tariff announcements and that the company’s statements about its business, operations and prospects were materially false or misleading.
The complaint, filed in the U.S. District Court for the District of Maryland, argues that CarMax’s disclosures lacked a reasonable basis for the optimistic growth narrative. The class period covers 98 days, and the filing represents the first formal legal challenge to the company’s recent earnings and guidance announcements.
CarMax released its second‑quarter fiscal 2026 results on September 25, 2025, reporting earnings per share of $0.64 versus the consensus estimate of $1.03, and revenue of $6.59 billion versus the expected $7.07 billion. The miss was driven by a decline in retail used unit sales of 5.4%, a 2.2% drop in wholesale units, and an 11.2% reduction in CarMax Auto Finance income due to a higher provision for loan losses.
Net income fell from $132.8 million in Q2 2025 to $95.4 million in Q2 2026, while gross profit contracted by 5.6% year‑over‑year. The company’s strategy to cut SG&A by at least $150 million over the next 18 months is intended to offset margin pressure, but the current results highlight the impact of pricing competition and a slowdown in used‑vehicle demand.
Bill Nash, the former CEO, said in the earnings call that the company remained confident in its long‑term strategy despite the challenging quarter. He also announced a new brand positioning campaign, “Wanna Drive?”, aimed at reinforcing CarMax’s omni‑channel experience. Nash’s departure on November 6, 2025, added uncertainty to the company’s leadership trajectory.
Investors and market participants have reacted with heightened scrutiny following the lawsuit, the earnings miss, the weak Q3 2026 guidance, and the CEO transition. The legal action raises the possibility of significant financial liability for CarMax and its executives and could prompt a reassessment of the company’s financial reporting and governance practices.
The lawsuit underscores the importance of accurate disclosure and the potential consequences of misstated growth prospects. CarMax will need to address the allegations and improve transparency to restore investor confidence and mitigate future regulatory scrutiny.
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