CarMax Shares Plunge as CEO is Dismissed Amidst Poor Q3 Projections

On November 6, 2025, CarMax, Inc. (NYSE: KMX) faced a turbulent market reaction as its shares dropped significantly by $9.48, representing a 23% decline. This plunge followed the announcement of the termination of CEO Bill Nash, effective December 1, 2025, alongside disappointing preliminary financial results for the third quarter of 2026. The company forecasted a troubling decrease in comparable store unit sales ranging from 8% to 12%, with net earnings per share (EPS) projected between $0.18 and $0.36. This forecast fell drastically short of analysts' expectations, which had anticipated an EPS of $0.69.

To add to the company's woes, industry analysts speculated that these disappointing forecasts hinted at a deeper issue regarding CarMax's growth model and market competitiveness. One analyst even noted that the pronounced decline in share value was indicative of 'heightened degree of share loss and margin pressure that is likely to take a while to arrest.'

These discouraging results coincide with the initiation of a securities class action, with law firm Hagens Berman currently investigating claims regarding the company's disclosures. The firm has urged investors who have faced substantial losses to step forward and recount their experiences. Investors are particularly concerned regarding potential misrepresentation of CarMax's business strength and growth potential.

The class action encompasses individuals who acquired CarMax securities between June 20, 2025, and September 24, 2025, a period during which the company had touted a double-digit EPS growth for its first quarter of 2026. CarMax reassured investors, stating that they were well-positioned to continue driving sales and capturing market share amidst a fragmented marketplace. However, the allegations suggest that the company may have misled shareholders about its strong performance, failing to reveal that the robust Q1 results were largely the result of consumers accelerating their purchases to evade impending tariffs.

Investors began to see the effects of this situation on September 25, 2025, when CarMax reported significant declines in its Q2 2026 financial figures. Notably, the firm's net EPS plummeted by 24% year-over-year, alongside a 5.4% decrease in retail used unit sales and a 6.3% decline in comparable store used unit sales. Furthermore, concerns arose regarding the quality of the CarMax Auto Finance (CAF) loan portfolio. The company disclosed an 11.02% reduction in CAF revenue year-over-year, attributed to a $142 million loan loss provision, despite prior reassurances to investors about the portfolio's robustness. This provision marked a staggering increase of nearly 40% sequentially and approximately 24% year-over-year.

As a result of these revelations, the company's shares fell by $11.45 that same day, equating to a 20% loss. Reed Kathrein, a partner at Hagens Berman spearheading the investigation, remarked, 'Our focus remains on investigating whether CarMax intentionally misled investors regarding the solidity of its business model and the actual growth prospects, alongside the quality of the CAF portfolio.'

For investors who have suffered losses or possess information that could aid in the investigation, the legal team encourages them to make contact. Whistleblowers with non-public details pertaining to CarMax are also invited to come forward, with insights potentially rewarded through the SEC Whistleblower program. Hagens Berman, which has been instrumental in corporate accountability, has successfully secured over $2.9 billion for clients who have been impacted by corporate wrongdoing.

In summary, the recent upheaval faced by CarMax raises critical questions about the company's transparency with investors and highlights the volatile nature of the auto retail market, where rapid changes can have profound implications for market players and stakeholders alike.