The details: The firm, which has $350 million invested in the used-car retailer, said CarMax has a strong business model, but that weak execution in key areas has limited its performance, and it outlined several steps the company should take.
To address these shortfalls, Starboard outlined the following steps:
Simplify the digital selling process with faster valuations, fewer steps, and a smoother user experience to capture more sellers.
Increase reconditioning efficiency through better automation and process optimization, potentially saving more than $300 per vehicle.
Simplify the online buying experience by clarifying pricing and financing, and more seamlessly integrating services such as warranties and financing to improve conversion rates.
Implement a data-driven dynamic pricing system and, if needed, temporarily reduce prices by $100–$300 per vehicle to regain sales volume and market share.
Reduce selling, general, and administrative (SG&A) costs by adopting zero-based budgeting and targeting SG&A at 70%–75% of gross profit, down from current levels, while leveraging AI to help cut costs.
What they’re saying: “One of CarMax’s most important structural advantages is its ability to source inventory directly from consumers. Specifically, 90% of CarMax’s vehicle acquisitions come from customer trade-ins rather than auctions, reducing acquisition costs relative to peers. However, this advantage has been diluted over time as competitors have improved their digital offerings to catch up and, in some cases, surpass CarMax,” noted the Starboard letter.
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Why it matters: Starboard’s message is a reminder that used-vehicle competition is increasingly being shaped by speed, convenience, pricing discipline, and operational efficiency—not just inventory access.
Between the lines: Starboard’s letter to Barr also underscores broader concerns around CarMax as competition tightens in the used segment and more shoppers steer away from new vehicles due to high prices.
Barr succeeds interim CEO David McCreight, who led the company after Bill Nash stepped down in December following a period of declining performance, including a 50.4% drop in net earnings in the third quarter of fiscal 2026.
In January, the retailer announced plans to implement an aggressive price-cutting strategy, reduce SG&A expenses by $150 million annually, and ramp up its marketing investments.
Bottom line: CarMax still has scale and sourcing advantages, but investors are clearly pushing for faster execution. Expect used-car retail competition to get tougher if major players sharpen digital buying and selling tools, lower costs, and become more aggressive on price.
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