CarMax (KMX), one of America’s biggest used-car retailers, has struggled in recent years amid elevated interest rates and a tightening car-buying market.

After seeing its quarterly sales peak at over 250,000 cars in 2021, sales have dwindled to around 150,000 cars last year.

Interest rate spikes heavily contributed to this decline. With inflation surging to 9% by June 2022, the Fed was forced to hike rates 11 times between 2022 and 2023, raising rates from near-zero to as high as 5.5%.

The interest rate tightening cycle made car loans more expensive to finance, effectively pricing consumers out of the market.

Although the Fed has cut interest rates multiple times in recent years, they are still elevated compared to before the initial rate hikes. CarMax hasn’t witnessed a recovery in willing buyers, and as such has been forced to cut prices in an effort to move its aging inventory.

Still, CarMax has been unable to reengage any momentum. After sales rose from $19 billion in 2021 to $31.9 billion in 2022, revenue has declined in each of the past three years, falling to $26.4 billion in 2025.

Uniform Accounting makes CarMax’s recent struggles especially clear.

From 2018 to 2022, CarMax’s Uniform return on assets (“ROA”) hovered between 4% to 5%. But since 2023, returns have collapsed to 2% and have remained flat since.

These trends made themselves apparent in the company’s most recent quarter.

In the face of this decline, the company decided to shake up its leadership late last year. Following more than 9 years in charge of the company, CarMax announced in November 2025 that William Nash would step down as CEO.

It remains to be seen whether or not new CEO Keith Barr will be able to turn CarMax’s fortunes around.

But activist investor Starboard Value has refused to wait and see, instead it is taking a hands-on approach. In March the investment firm disclosed its $350 million position in the embattled car retailer and nominated two new board members to oversee CarMax.

After discussions with Starboard, CarMax added one of the activist investor’s nominees to its board in April, giving Starboard a say in CarMax’s direction moving forward.

However, turning around this business will be no easy task. Earlier this week the company’s fourth-quarter earnings highlighted another year of declining sales along with net income falling from $501 million to $247 million in the past year.

This, along with management’s further commitment to lowering prices and selling older, higher-mileage vehicles have investors concerned about management’s turnaround timeline.

Shares are down more than 15% since the market closed on Monday. Starboard Value believes CarMax’s stock is undervalued, and it can restore market confidence in the company.

Until we see a tangible improvement in this company’s sales volume and a recovery in the wider automotive market, most investors would be wise to stay away for now.

Best regards,

Joel Litman & Rob Spivey
Chief Investment Officer &
Director of Research
at Valens Research

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