The retail operation is the core revenue driver: CarMax acquires vehicles through consumer trade-ins, direct consumer purchases, dealer purchases, and wholesale auctions, then reconditions them to 'CarMax Quality Certified' standards before sale. Carvana has since restructured and returned to growth, selling approximately 300,000+ units annually, but lacks CarMax's physical store network and captive finance operation. These platforms are growing rapidly but lack CarMax's physical inspection infrastructure and direct consumer acquisition channels. Amazon's announced entry into used vehicle sales — initially as an advertising platform for dealers — could become a more significant threat if the company expands into transaction facilitation or inventory ownership. Net earnings per diluted share were $3.21, up 6.3% from $3.02, reflecting earnings growth and share repurchases. Competition is intensifying from digital-native retailers, particularly Carvana, which operates without physical superstores and has invested heavily in vending machine-style delivery centers and fully online transactions. Each new superstore costs approximately $15-20 million to build and outfit, with ongoing occupancy and staffing expenses. If unemployment rises or consumer defaults increase, CAF's loan loss provisions could expand significantly, compressing profitability. Similarly, average retail selling prices declined approximately $1,250 per unit (4.6%) in Q2 FY2025, offsetting unit growth. The company requires 'low-single-digit gross profit growth' to lever SG&A, meaning even modest revenue declines or gross profit compression could prevent operating use. CarMax's growth strategy in fiscal 2026-2028 focuses on selective physical expansion, digital capability enhancement, and CAF lending platform development. The company is also adding stand-alone reconditioning centers and auction facilities to support store growth without requiring full superstore investment. The digital strategy centers on increasing the share of omnichannel and fully online sales. CarMax is investing in AI-driven vehicle appraisal tools, enhanced virtual vehicle tours, simplified online financing applications, and home delivery logistics. CAF growth is a critical priority. The company is balancing penetration growth with credit quality: the allowance for loan losses was 2.61% of managed receivables as of February 2025, down from 2.70% in November 2024, reflecting the impact of tightened underwriting. Vehicle acquisition diversification is another growth lever. CarMax is expanding its instant online offer program, which allows consumers to receive purchase offers for their vehicles without visiting a store. International expansion is not currently part of the strategy; CarMax operates exclusively in the United States. The company is focused on deepening penetration in existing markets rather than geographic diversification. CarMax's strategic priorities for fiscal 2026 and beyond center on three pillars: unit growth recovery, credit discipline, and operational efficiency. The company plans to open new store locations selectively, with 5 stores opened in fiscal 2025 (El Paso, TX; Gainesville, GA; Alliance, TX; Mays Landing, NJ; and Visalia, CA) and continued expansion in existing television markets. The store opening cadence is measured — typically 5-10 stores annually — reflecting the capital intensity of each location ($15-20 million per store) and the company's focus on market density over geographic breadth. CarMax expects this mix to 'continue to grow over time as we add further enhancements to our online tools, customers become more accustomed to leveraging them and we improve our ability to track their use.' The company is investing in AI-driven appraisal and pricing enhancements, automated reconditioning workflows, and faster delivery service level agreements (SLAs). However, the company is balancing growth with credit discipline: CAF tightened underwriting standards in response to industry-wide loan loss deterioration, and the weighted average contract rate of 11.3% reflects a focus on profitable loans rather than volume. The company is also expanding supply diversification through instant online offers for consumer vehicle purchases and dealer acquisition channels. In Q2 FY2025, dealer purchases increased 61.4% year-over-year to 31,000 units, suggesting CarMax is building a B2B platform for dealer inventory disposition. If interest rates decline and vehicle affordability improves, CarMax could see accelerated unit growth and CAF penetration. The company's guidance for fiscal 2026 indicates expectations for 'low-single-digit gross profit growth' to achieve SG&A use, suggesting modest rather than aggressive growth targets. Analysts project revenue of approximately $26-27 billion for fiscal 2026, with earnings growth dependent on unit volume, gross profit per unit, and CAF performance. In 1997, CarMax conducted its initial public offering, raising capital to accelerate expansion while remaining a Circuit City subsidiary. The IPO valued the company at a premium to traditional auto retailers, reflecting investor enthusiasm for the market-shifting retail model. In 2002, CarMax was spun off from Circuit City through a tax-free transaction, becoming an independent, publicly traded company on the NYSE under the ticker symbol 'KMX.' The separation allowed CarMax to focus exclusively on used vehicle retail while Circuit City focused on consumer electronics. Post-spin-off, CarMax accelerated national expansion, surpassing 75 stores by 2005 and 100 stores by 2013. In 2013, CarMax invested heavily in e-commerce and mobile discovery capabilities, recognizing that digital research was becoming integral to the vehicle purchase process. The COVID-19 pandemic in 2020 accelerated digital adoption, with CarMax scaling home delivery, curbside pickup, and full-cycle online purchases. In 2021-2022, CarMax expanded instant online offers for consumer vehicle sales, allowing customers to receive purchase offers without visiting stores. The high-rate environment of 2023-2024 pressured affordability and compressed unit sales, leading CarMax to emphasize margin protection, underwriting discipline, and selective growth.