CarMax Earnings Call Nuggets: Traffic and Conversions & Tax Refund Season
Traffic and Conversions
Simeon Gutman – Credit Suisse: So, my one question on traffic and conversion. It sounds like conversion has been a bigger driver of the comp for the past few quarters; traffic not as much. So, Tom, as you think about traffic coming back, we speak a lot about sentiment and macro. Is it just that or do you think as the volume of some of the late-model vintages start to improve, will that be a traffic driver in and of itself?
Tom Folliard – President and CEO: Yeah, I think that’s a possibility. We have always thought about when we think – when we project our – what we think our sales will be, we always think roughly in terms of comp sales that we’ll get about half from traffic and half from conversion, and that’s largely true over the long-haul, if not always true in a specific quarter. So in the fourth quarter, it was driven more by conversion than it was by traffic, but we still think over the long-haul we’ll get about half from both. But we’re extremely pleased with the execution in our stores. We have a lot of initiatives we worked on over the last couple of years with the training and other things and it looks like it is really paying off and our store teams are just doing a great job executing with the customers that they have.
Tax Refund Season
Matthew Nemer – Wells Fargo Securities: Congratulations on a great year. My question is did you see any impact to your business from the delayed tax refund season in terms of the cadence of sales? Then if I could sneak in a quick follow-up, which is any competitive response to lower cap rates from either your lender partners or other lenders that you’re now partnered with?
Tom Folliard – President and CEO: So on the first part, we don’t really talk about cadence in the quarter, but what I will say is every year tax season is an approximation. So it happens, but it moves around between the end of January and all the way into March. This year there was a delay, but (at odd) times the tax season is going to straddle the fiscal year for us anyway. So to us I don’t think it really matters. I think at the end of the day we’ll get all the sales that we expect to get, but it’s really difficult to figure out without some more time passing and being able to take a look back exactly how it fell, but we sold a lot of cars. In terms of the competitiveness to the rate.
Tom Reedy – EVP and CFO: Yes, I can speak that a little Matt. With regard to the partners, as you know, we get the first look at the customers that are coming through the door. So they really don’t have the opportunity to respond and compete with us in the system unless we’ve conditioned the offer somehow and it passed down to them. With respect to others, people that’s a competitive environment in general. I think what we’ve seen happen and what we’ve been doing over the last couple of quarters is we’ve seen our better customers been warmer to taking us up on more aggressive rate offers. As we do that and as the combination of the decrease in the APR they receive plus the increase in sales and the increase in amount of CAF penetration all combined, we’re looking at that constantly to determine what the optimal mix is if that’s possible and try to optimize profit for CarMax all-in going forward. But it’s very difficult to see if there is any kind of competitive response to what we’re doing because that world is going on whether we’re there or not.
Tom Folliard – President and CEO: But I’m back to Tom’s point. I think what we’re doing has been working and we’ve been sticking with it. So there have been times in the past where lowering rate to our best credit customers hasn’t necessarily delivered in terms of incremental sales, whereas now it’s working pretty well.
A Closer Look: CarMax Earnings Cheat Sheet>>