CarMax slashed prices to win back buyers. It cost the company $121 million.

CarMax slashed prices to win back buyers. It cost the company $121 million.

The move generated a $120.7 million loss in the fourth quarter, turning last year’s $89.9 million profit into a steep reversal. Per-share results swung from a 58-cent gain to an 85-cent loss. Shares fell more than 13% the day the results were announced and have dropped 37% over the past year.

The price cuts came after CarMax lost ground to competitors by becoming too expensive in consumers’ eyes. Interim CEO David McCreight acknowledged in December that the company’s average selling prices had drifted upward and were no longer competitive. To fix that, CarMax reduced prices and eliminated hundreds of jobs.

Activist investor Starboard Value, which holds a $350 million stake, had urged the shift. It called for a more responsive, data-driven pricing system and temporary reductions of $100 to $300 per vehicle to match local market conditions. The firm argued that CarMax’s old model—targeting stable gross profit per unit—was too rigid during periods of market volatility.

The broader context deepened the pressure. Used vehicle prices rose 6.2% from a year earlier in March, reaching their highest level since summer 2023. The average listed price in February was $25,287. New vehicles averaged more than $49,100. At the same time, gas prices jumped from under $3 to $4.10 per gallon in just six weeks, tightening household budgets.

The challenge now falls to new CEO Keith Barr, who took over in February after the departure of Bill Nash at the end of 2025. Restoring competitiveness without eroding margins further will require more than temporary discounts. It will require a pricing system that adapts without alienating customers—a balance that has eluded even Walmart and Wendy’s in their own algorithm-driven experiments.

CarMax’s $120.7 million loss is not just a quarterly blip. It is the cost of catching up to a market it let slip away.