CarMax plunges 16% as 'vehicle affordability challenges' drive 3rd-quarter earnings and revenue miss

• CarMax shares sharply fell Thursday as the used-car retailer missed third-quarter expectations.
• Customers are facing "vehicle affordability challenges" with high inflation and interest rates.

CarMax shares tumbled Thursday as the used-vehicle retailer badly missed expectations for its third-quarter financial results, saying consumers are having trouble affording cars in the face of high inflation.

The stock fell as much as 15.5% to $50.11 in premarket trade. The stock hasn't traded below $50 since November 2016. Ahead of Thursday's session, shares had lost about 54% on a year-to-date basis.

Per-share earnings dropped by 85% from a year ago to $0.24, missing the $0.70 estimate from Thomson Reuters. Revenue dropped about 24% to $6.51 billion, below the consensus estimate of $7.3 billion.

Total retail used units sold fell by 20.8% from a year ago to 180,050 in the quarter that ended November 30. Same-store used unit sales also fell, by 22.4%. Average selling prices for its used cars increased by 1.9% to $28,530 in the third quarter.

"We believe vehicle affordability challenges continued to impact our third quarter unit sales performance, as headwinds remain due to widespread inflationary pressures, climbing interest rates, and low consumer confidence," CarMax CEO Bill Nash said in the quarterly results.

Consumers and business alike are dealing with a surge in borrowing costs as the Federal Reserve this year has sharply pushed up its benchmark interest rate from near 0% to bring down high inflation levels. Used-car prices have cooled from hotter levels this year but the spike helped fuel a surge in consumer inflation readings.

CarMax is also suspending share buybacks, citing its quarterly performance and "continued market uncertainties."

"External title data indicates that we gained market share on a year-to-date basis through October, though we've seen some recent loss of share. We are focused on profitable market share gains that can be sustained for the long-term," CarMax said.