CarMax Plans More Auto Superstores

Top car retailer CarMax Inc. ( KMX - Analyst Report ) is planning to launch two auto superstores in Denver. One of the stores will be located at 5850 S. Broadway, near South Broadway and Littleton Boulevard in Littleton. The second one will be set up at 2600 W. 104th Avenue, Federal Heights.

The company incurred an expenditure of $6 million to purchase the auto store located at Federal Heights, which was previously owned by General Motors Company's ( GM - Analyst Report ) Saturn automobile dealership. The average space of stores is 15,000 to 45,000 square-feet and each of them is anticipated to employ about 50 to 150 sales employees and service technicians.

At the beginning of this month, CarMax opened the first auto superstore in Franklin, Tennessee. Located at 4075 Mallory Lane, the store occupies 8.42 acres of land covering 32,481-square-feet. The new superstore with a capacity of 250 to 350 used vehicles provides job opportunities to more than 50 employees.

CarMax plans to open between 10 and 15 superstores during each of the three fiscal years following fiscal 2013. In accordance with the plan, the company has already opened stores in Lancaster, Pennsylvania in March, Bakersfield, California in April and Franklin, Tennessee in June.

Further, it plans to open stores in Fort Myers and Naples in Florida (in second quarter of fiscal 2013), Oxnard, California and Des Moines, Iowa (in third quarter of fiscal 2013) and Jackonsville, Florida (in fourth quarter of 2013) apart from the announced two stores in Denver.

CarMax is the one of the largest retailers of used vehicles. The company has pioneered the used car superstore concept with the inauguration of the first store in 1993. As of June 11, 2012, the company has operated around 111 used car superstores in 55 markets. It delivers 250 to 500 vehicles per lot with average selling price of $19,000. The vehicles are usually less than six years old with maximum 60,000 miles driven.

The automotive retailer is among the strongest operators in its peer group, which includes AutoNation Inc. ( AN - Analyst Report ) and Penske Automotive Group ( PAG - Analyst Report ) . However, CarMax retains a Zacks #4 Rank, which translates into a short-term (1 to 3 months) Sell rating due to the sluggish used-car market.