8-K: CarMax CEO Transition, Interim Leadership Amid Weak Q3 Outlook

CarMax announced a leadership change with CEO William D. Nash stepping down, David W. McCreight appointed Interim CEO, and Tom Folliard as Interim Executive Chair, alongside a preliminary weak third-quarter financial outlook.

Summary

• William D. Nash was terminated as President and Chief Executive Officer, effective December 1, 2025, and resigned from the Board of Directors.
• David W. McCreight, a current director, has been appointed Interim President and Chief Executive Officer, effective December 1, 2025.
• Thomas J. Folliard, the current non-executive Chair, has been appointed Interim Executive Chair of the Board, effective December 1, 2025.
• The Board's size will be reduced by one director, resulting in nine directors, effective December 1, 2025.
• A comprehensive search process for a permanent CEO is ongoing, supported by Russell Reynolds Associates.
• Preliminary financial outlook for the third fiscal quarter ending November 30, 2025, includes a comparable store used unit sales decrease of 8%-12%.
• Preliminary net earnings per diluted share for Q3 FY26 are expected to be $0.18-$0.36, which includes $0.09 of non-recurring expenses primarily related to the leadership change and Customer Experience Center workforce reductions.
• Third-quarter results have been impacted by a decline in retail unit sales, sharp depreciation in the wholesale business, and a material year-over-year increase in marketing spend.
• The CarMax Auto Finance loan loss provision has been trending in-line with expectations set in the second quarter of fiscal year 2026.
• Shira Goodman was appointed to the Compensation and Personnel Committee, and Mark O'Neil was appointed as chair of the Committee, effective December 1, 2025.

Sentiment

Score: 3

Explanation: The filing indicates significant leadership changes due to unsatisfactory performance and provides a weak preliminary financial outlook for the third quarter, suggesting operational challenges and a difficult market environment. While new leadership is in place, the immediate financial prospects are negative.

Positives

• Appointment of experienced retail leaders, David McCreight and Tom Folliard, to guide the company during this transitional period.
• The CarMax Auto Finance loan loss provision is trending in-line with expectations, indicating stability in that segment.
• The Board is actively addressing performance issues by implementing significant leadership changes and initiating a search for a permanent CEO.

Negatives

• Termination of CEO William D. Nash signals dissatisfaction with the company's recent performance and strategic direction.
• Preliminary Q3 FY26 comparable store used unit sales are expected to decrease significantly by 8%-12%.
• Preliminary Q3 FY26 net earnings per diluted share are projected to be low at $0.18-$0.36, including $0.09 in non-recurring expenses.
• The company's results are negatively impacted by a decline in retail unit sales and sharp depreciation in the wholesale business.
• Marketing spend is expected to increase materially year-over-year in Q3, potentially pressuring margins.

Risks

• Changes in the competitive landscape and/or failure to successfully adjust to such changes.
• Changes in general or regional U.S. economic conditions, including economic downturns, inflationary pressures, fluctuating interest rates, tariffs or the effect of trade policies, and the potential impact of international events.
• Changes in the availability or cost of capital and working capital financing, including changes related to the asset-backed securitization market.
• Events that damage the company's reputation or harm the perception of the quality of its brand.
• Significant changes in prices of new and used vehicles.
• A reduction in the availability of or access to sources of inventory or a failure to expeditiously liquidate inventory.
• Inability to realize the benefits associated with the omni-channel platform or initiatives designed to leverage evolving technologies, including AI.
• Factors related to geographic and sales growth, including the inability to effectively manage growth.
• Inability to recruit, develop and retain associates and maintain positive associate relations.
• The loss of key associates from store, regional or corporate management teams or a significant increase in labor costs.
• Changes in economic conditions or other factors that result in greater credit losses for CarMax Auto Finance's portfolio of auto loans than anticipated.
• The failure or inability to realize the benefits associated with strategic investments.
• Changes in consumer credit availability provided by third-party finance providers.
• Changes in the availability of extended protection plan products from third-party providers.
• The performance of the third-party vendors relied on for key components of the business.
• Adverse conditions affecting one or more automotive manufacturers.
• The inaccuracy of estimates and assumptions used in the preparation of financial statements, or the effect of new accounting requirements or changes to U.S. generally accepted accounting principles.
• The failure or inability to adequately protect intellectual property.
• The occurrence of severe weather events.
• The failure or inability to meet environmental goals or satisfy related disclosure requirements.
• Factors related to the geographic concentration of stores.
• Security breaches or other events that result in the misappropriation, loss or other unauthorized disclosure of confidential customer, associate or corporate information.
• The failure of or inability to sufficiently enhance key information systems.
• Factors related to the regulatory and legislative environment in which the company operates.
• The effect of evolving regulations, disclosure requirements, standards and expectations relating to environmental, social and governance matters.
• The effect of various litigation matters.
• The volatility in the market price for common stock.
• Preliminary financial outlook and results for the third quarter of fiscal year 2026 are not yet finalized and could differ from those set forth in this filing.

Future Outlook

The company expects a challenging third quarter for fiscal year 2026, with declines in comparable store used unit sales and lower net earnings per diluted share, impacted by retail sales decline, wholesale depreciation, and increased marketing spend. The Board is actively searching for a permanent CEO to lead the company into its next phase of growth, focusing on driving sales, enhancing profitability, and reducing costs during the interim period.

Management Comments

• Tom Folliard: "Our recent results do not reflect that potential and change is needed."
• Tom Folliard: "The Board has decided that more direct involvement from David and me will help strengthen the business in this transitional period."
• Tom Folliard: "During this time, we are focused on driving sales, enhancing profitability and reducing cost."
• Tom Folliard: "The Board of Directors appreciates Bill's leadership and contributions to CarMax throughout his more than 30 years with the Company."
• David McCreight: "I am honored to serve as the Interim CEO at a critical point in CarMax's history."
• David McCreight: "Working with Tom, I am confident we can strengthen CarMax as the Board identifies a permanent CEO to successfully lead CarMax into its next phase of growth."

Industry Context

The used car retail industry is facing headwinds, as evidenced by CarMax's preliminary Q3 results showing declining retail unit sales and sharp depreciation in the wholesale business. This suggests a challenging market environment, possibly due to factors like higher interest rates impacting consumer affordability, increased inventory, or broader economic pressures affecting discretionary spending on big-ticket items like used cars. CarMax's increased marketing spend indicates an effort to maintain market share or drive demand in a competitive landscape.

Management Changes

Corporate Governance

Stakeholder Impact

• Shareholders: Potential negative impact due to weak preliminary financial results and uncertainty surrounding leadership transition, but also potential for long-term improvement with new strategic direction.
• Employees: Customer Experience Center workforce reductions mentioned as a source of non-recurring expenses, indicating job losses. Uncertainty for other employees during leadership transition.
• Customers: New brand positioning launch and increased marketing spend aim to enhance customer experience and drive sales.
• Management: Significant changes at the top, with CEO termination and interim appointments, creating a period of transition and strategic re-evaluation.

Next Steps

• The Board will continue its comprehensive search process to identify a permanent successor for Mr. Nash.
• The company will report its full fiscal year 2026 third quarter financial results on December 18, 2025.
• Interim leadership is focused on driving sales, enhancing profitability, and reducing costs during the transition period.

Key Dates

Recommendation

The termination of the CEO, coupled with a significantly weak preliminary Q3 financial outlook (declining sales, sharp wholesale depreciation, low EPS with non-recurring costs), signals severe operational challenges and a deteriorating market position. While interim leadership is in place, the immediate future appears difficult, and the search for a permanent CEO introduces further uncertainty. Investors should consider selling to mitigate potential downside risk until there is clear evidence of a turnaround and improved financial performance.

Keywords

CarMax, KMX, CEO Transition, Interim CEO, Financial Outlook, Q3 Earnings, Used Car Retail, Automotive Retail, Leadership Change, Corporate Governance, Retail Sales, Wholesale Business, Auto Finance