CarMax 2016 Annual Report Download - page 19
Download and view the complete annual report
Please find page 19 of the 2016 CarMax annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.15
Management’s Discussion and Analysis of Financial Condition and Results of Operations, and the notes to consolidated financial
statements included in Item 8.
The implementation of new accounting requirements or other changes to U.S. generally accepted accounting principles could have
a material adverse effect on our reported results of operations and financial condition.
Our business is subject to seasonal fluctuations.
We generally realize a higher proportion of revenue and operating profit during the first and second fiscal quarters. If conditions
arise that impair vehicle sales during the first or second fiscal quarters, these conditions could have a disproportionately large
adverse effect on our annual results of operations.
Our business is sensitive to weather events.
The occurrence of severe weather events, such as rain, snow, wind, storms, hurricanes, extended periods of unusually cold weather
or natural disasters, could cause store closures or affect the timing of consumer demand, either of which could adversely affect
consumer traffic and could have a material adverse effect on our sales and results of operations in a given period.
We are subject to local conditions in the geographic areas in which we are concentrated.
Our performance is subject to local economic, competitive and other conditions prevailing in geographic areas where we
operate. Since a large portion of our sales is generated in the Southeastern U.S., California, Texas and Washington, D.C./Baltimore,
our results of operations depend substantially on general economic conditions and consumer spending habits in these markets. In
the event that any of these geographic areas experience a downturn in economic conditions, it could have a material adverse effect
on our business, sales and results of operations.
Item 1B. Unresolved Staff Comments.
None.
Item 2. Properties.
We generally conduct our retail vehicle operations in two formats – production and non-production stores. Production stores are
those locations at which vehicle reconditioning is performed. Production stores have more service bays and require additional
space for reconditioning activities and, therefore, are generally larger than non-production stores. In determining whether to
construct a production or a non-production store on a given site, we take several factors into account, including the anticipated
long-term regional reconditioning needs and the available acreage of the sites in that market. As a result, some stores that are
constructed to accommodate reconditioning activities may initially be operated as non-production stores until we expand our
presence in that market. As of February 29, 2016, we operated 85 production stores and 73 non-production stores. Production
stores are generally on 10 to 25 acres, but a few range from 25 to 35 acres, and non-production stores are generally on 4 to 12
acres.
We have recently incorporated small format stores into our future store opening plans. These stores are located in smaller markets
or areas where the sales opportunity is below that of mid-sized and large markets. They are generally located on 3 to 7 acres,
although small format stores with production capabilities may be somewhat larger. As of February 29, 2016, we had 10 small
format stores.
As of February 29, 2016, we operated 67 wholesale auctions, most of which were located at production stores. Stores at which
auctions are conducted generally have additional space to store wholesale inventory.