車美仕 (KMX) 2019 Q4 法說會逐字稿

Good morning.

My name is Kim, and I will be your conference operator today.

At this time, I would like to welcome everyone to the CarMax Fiscal 2019 Fourth Quarter Earnings Conference Call.

(Operator Instructions) Thank you.

I would now like to turn the call over to Katharine Kenny, Vice President, Investor Relations.

Thanks, Kim, and good morning, everyone.

Thank you for joining our fiscal 2019 fourth quarter earnings conference call.

I'm here with Bill Nash, our President and Chief Executive Officer; and Tom Reedy, our Executive VP and CFO.

Let me remind you that our statements today regarding the company's future business plans, prospects and financial performance are forward-looking statements that we make pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

These statements are based on management's current knowledge and assumptions about future events that involve risks and uncertainties that could cause actual results to differ materially from our expectations.

In providing projections and other forward-looking statements, the company disclaims any intent or obligation to update them.

For additional information on important factors that could affect these expectations, please see the company's annual report on Form 10-K for the fiscal year ended February 28, 2018, filed with the SEC.

(Operator Instructions)

Bill?

Great.

Thank you, Katharine.

Good morning, everyone, and thanks for joining us.

Today, I'll start with a fourth quarter highlights.

After that, I'll turn the call over to Tom.

And he will discuss SG&A, investments and consumer finance, and then I'll share an overall update on our omnichannel rollout, which has been very well received.

And then as always, I'll open it for your questions.

Starting with the fourth quarter results.

I'd like to reiterate what I said in the earnings release.

We are pleased with our double-digit pretax earnings growth even after adjusting for the discretionary bonus we paid last year to eligible associates.

We achieved this in the midst of continued investments in our business and our associates.

This is a testament to the strength of our diversified business model and ongoing focus on operational efficiencies.

Used unit comps grew by 2.8% compared to a negative 8% in the prior year's fourth quarter.

They were driven by strong conversion, partially offset by lower store traffic.

While we are pleased to report positive comps this quarter, we believe they were affected by delays in the February tax refunds relative to last year, continued higher acquisition prices and a robust competitive environment.

Total used units grew by 5.6%.

As you know, we track market share data on a calendar year basis and report it once a year in the fourth quarter.

Our data indicates that our share of 0 to 10-year-old vehicles in our current comp markets fell from approximately 4.5% in 2017 to 4.4% in 2018.

While this is disappointing, the decrease in share occurred earlier in the year and started to reverse in the second half of the year when we saw share gains.

This year's decrease was in comparison to an almost 7% growth in comp market share in calendar year 2017, which was our largest increase in 4 years.

Our website traffic grew in the fourth quarter by 13%.

Our retail gross profit per used unit remained stable at $2,166 compared to $2,147 last year.

As we shared in the past, there are 2 primary factors that impact our decisions around gross profit per unit.

The first is ensuring that our prices are competitive in the marketplace.

Second, we focus on optimizing total gross profit dollars by balancing margin per vehicle and unit sales.

We are confident in our price competitiveness, but as always, we will continue to monitor and test pricing elasticity.

Wholesale units grew by 3.7% compared to last year's fourth quarter, and gross profit per wholesale unit grew to $977 this quarter compared to $946 in the prior year period.

Other gross profit was a strong contributor to the quarter, increasing by almost 42% or $32 million.

As we mentioned earlier, this year, we secured provided cost decreases related to EPP revenues.

We used a portion of these funds to improve the margins and the remainder to selectively reduce prices, which drove increased penetration.

Service margin benefited from comp sales growth as we were able to leverage service overhead, and third-party finance fees benefited from the shift in our sales mix by finance channel.

This explains the majority of the increase.

The remainder relates to a positive adjustment to our EPP cancellation reserve as a result of our annual model update and the discretionary bonus of approximately $4 million that we paid to our service department associates in last year's fourth quarter.

Before I turn the call over to Tom, let me discuss our sales mix and store openings.

As a percentage of our sales, 0 to 4-year-old vehicles decreased to about 72% versus 76% in the fourth quarter of last year and 77% in the third quarter.

Total SUVs and trucks accounted for about 46% of our sales, up from 43% this time last year.

During the fourth quarter, we opened 5 stores, which included 3 stores in new television markets: Buffalo; Montgomery, Alabama; and New Orleans.

We also opened stores in our existing television markets of Orlando and Portland, Oregon.

During the first quarter of fiscal '20, we plan to open 3 stores, one of which we opened earlier this week and represents our second store in the Memphis market.

We will also open 2 stores in Texas, which are new markets: Waco and McAllen.

Tom?

Thank you, Bill.

Good morning, everyone.

On SG&A, expenses for the quarter increased 5% to $429 million.

Factors increasing SG&A expense in the fourth quarter included the opening of 19 stores since the beginning of the fourth quarter of last year, which represents a 10% growth in our store base, our continued investment in technology platforms and digital initiatives and an increase of $3.9 million or $19 per unit related to share-based compensation expense.

SG&A per unit was $2,380, a $17 decrease year-over-year.

We are pleased to show SG&A leverage as it demonstrates that we're able to offset some of the growth in spend with efficiencies and staffing optimization.

I'll remind you that within the comp and benefits lines, prior year amounts include roughly $4 million of the discretionary bonus that was paid to eligible associates last year.

Also, the timing of our advertising spend last year was weighted towards the end of the year, which accounts for the relative lack of growth in advertising dollars this fourth quarter.

We continue to invest in 3 primary areas: our associates, our legacy system and our digital initiatives.

For associates, this includes a variety of wage adjustments and health care plan enhancements.

Our associates are vital to our success, and maintaining a very competitive compensation and benefits program is key to attracting and retaining the best talent.

In order to execute our omnichannel vision, we must continue to upgrade our legacy operating systems.

While this spending won't offer short-term return, it is critical to our future competitive position.

We will also continue to invest in digital initiatives.

We are developing and implementing tools that help our associates be more efficient and effective.

In addition, we continue to introduce online enhancements to improve the customer experience.

Now moving over to CapEx.

We expect to spend $350 million for fiscal '20, that's roughly $50 million above FY '19.

And this spend includes a shift in some spending originally planned for our fiscal 2019, the 13 FY '20 stores plus land acquisition for future openings and 3 customer experience centers.

Looking out to fiscal '21.

We are in a position to open a similar number of stores as we have targeted in the last few years.

However, our business model is clearly evolving, and we will continue to evaluate both the number and type of locations we need going forward.

Finally, we plan to support shareholder returns by continuing to invest in our capital structure.

During the fourth quarter, we repurchased 4.4 million shares for $270 million.

For the full year, we returned $903 million, buying back 13.6 million shares compared to about 9 million in FY '18.

While maybe stating the obvious, the return on this investment shows up in the difference between net income growth and EPS growth, roughly 6.5 percentage points for the fiscal year.

We have over $2 billion remaining in our current stock repurchase authorization.

And now moving to CAF and our financing results.

Our third-party lending partners continued their strong performance.

Tier 2 executed especially well year-over-year, accounting for 19.5% of used unit sales compared with 15.4% last year.

While Tier 3 represented 10.7% of sales compared to 11.7% last year, their performance as measured by sales applications continues to be very solid.

CAF penetration, net of 3-day payoffs, was 42.1%, down marginally from last year's fourth quarter.

CAF's net loans originated in the quarter grew by 4.5% to $1.5 billion.

The modest decline in penetration slightly offset our sales growth and the small increase in the average amounts announced.

CAF income increased $2.6 million to $104 million.

This was a result of the growth in average managed receivables, partially offset by the continued slight compression in portfolio interest margin.

Total portfolio interest margin was 5.5% of average managed receivables compared to 5.6% in both the fourth quarter of last year and this year's third quarter.

For loans originated during the quarter, the weighted average contract rate charged to customers was 8.7% versus 7.9% a year ago and 8.5% in this year's third quarter.

A provision for loan losses at $42.1 million grew in line with the portfolio.

And the allowance for loan losses was 1.10% of ending managed receivables, consistent with both last year's fourth quarter and with the third quarter.

Now I'll turn the call back over to Bill.

Thank you, Tom.

As you all know, we've been laying the groundwork in building towards the development of a new experience for the past couple of years.

To launch it successfully, we took a number of steps, including forming our product organization, upgrading our technology and then leveraging these to construct new digital capabilities and online consumer experience offerings.

These investments are essential to our vision for the future.

Spending for FY '20, like in FY '19, will represent a step-up in investment.

So we believe we will require comps in the range of 5% to 8% to leverage SG&A, similar to our thinking for FY '19.

We expect the amount of growth in the spending to slow in FY '21 and taper after that.

We will continue to look for opportunities to reduce waste and reprioritize spend, which contributed to our ability to leverage this fourth quarter.

Now let me talk a little bit more about Atlanta and our omnichannel rollout.

Please, remember that Atlanta is 1 market and that we've only had a few months of experience to evaluate.

With that said, we are very pleased with our performance.

In conjunction with the launch of omnichannel, we introduced a number of other elements, including increased free transfers, a new website, a new advertising campaign and pricing tests.

In the fourth quarter, we achieved double-digit growth in both comp sales and appraisal buys.

This increase was beyond what we would have expected to gain.

We are also pleased with the high conversion on home delivery sales, although it represents a very small percentage of overall sales at this point.

In comparison to our stores in the Atlanta market, home delivery finance penetration is similar while Max care penetration is a little lower.

Keep in mind, I normally don't give market-specific details nor do I plan to change this practice going forward, but given the interest to this new initiative, I wanted to give a little more context.

We also know that we will be less efficient in some of our operations in the near term as we roll out the omnichannel experience.

Some of these inefficiencies are by design and some are simply those related to starting up a new capability.

As a result, our sales in the Atlanta market are a little less profitable per unit compared with other markets at this point.

We do believe that we'll be able to improve on this as we continue to roll out omnichannel and as our consumer experience mature.

We also believe this unique experience could be more efficient than our current model.

We have a strong track record of operational excellence, and we are confident in our ability to optimize.

Most importantly, after seeing the results so far in Atlanta, we're even more confident that this is the right direction.

We believe that the omnichannel experience will be one of the key levers that help drive comp sales and market share growth going forward.

Now let me talk about the next steps.

This fiscal year, we expect to open 3 CECs, or customer experience centers, across the U.S. Each will have an average staff of 300 associates and will serve multiple states.

Our experience in Atlanta suggests that we will be offset these additional associates with the reduction in sales consultants in the omnichannel stores, which will be realized through normal attrition.

The first CEC will be in Atlanta and will open early in the second quarter as it supports the next phase of our omni rollout, which will include Florida stores.

We also expect to open a second CEC site in Kansas City later in the second quarter, and we are currently working on the third site.

As we previously said, we plan to bring the omnichannel experience to the majority of our customers by February 2020.

As I've often talked to you about before, we are leveraging the strengths of the CarMax model that we've built over the last 25 years to deliver this new experience.

Strengths include our skilled and knowledgeable associates, our national footprint and transportation infrastructure, our inventory scale and merchandising capabilities, our continued investment in technology and digital capabilities and our industry-leading brand.

These strengths are not only critical, but essential to delivering an omni experience, an experience that's tailored to every single customer, an experience that is unmatched, and we believe will be the future of car buying.

Now we'll be happy to take your questions.

Kim?

(Operator Instructions) Your first question comes from Sharon Zackfia from William Blair.

Thanks for the color on Atlanta.

I guess just a multifaceted question to keep in line with Katharine's rules around Atlanta.

Could you give us some color on what the comp trend was before omnichannel?

It was helpful to hear about the double digits, but I don't know if Atlanta was like similar to the overall company prior to that, just so we can understand the amount of improvement you saw when omnichannel rolled out.

And then secondly, could you give a little bit more color around that discussion about Atlanta being a little bit less profitable on a per-car basis?

Are you talking about just gross profit per car or all-in on a per-car basis?

And ultimately, do you think omnichannel is similar to your current model in terms of profitability?

Sharon, you're really pushing Katharine's rule.

Oh, yes.

All right.

Let me...

Well, she's retiring soon.

So...

Let me talk about the comp support -- first of all, I'm not going to go into any real detail on the comps, but I'll give you a little color in that.

We have a control group, obviously, that we look at.

And we're very pleased with the lift that we saw beyond the control group.

As far as the profitability, when I talked about little less profitable, that is all in.

So that's looking at SG&A, that's looking at margin.

Truthfully, on the SG&A pressures, as I addressed in my opening script, we feel like we can at least offset those.

And we feel like this model could be more efficient.

And as far as any type of margin pressures, those are 2 different -- whether you roll omni out and have -- decide to do something in different margin, those aren't dependent one -- on or the other.

Your next question comes from Brian Nagel from Oppenheimer.

I want to follow up on Sharon's questions.

I'll try to put mine all under one as well.

But with regard to Atlanta in that double-digit comp, can you talk about what -- if all the -- of all the facets, if you will, of the omnichannel effort in Atlanta, were you able to isolate what are the most important facets that's helping to drive that comp?

And to what extent is that improvement in sales reflective of you speaking to a reach -- speaking to or connecting with a potential new customer for CarMax?

Yes.

So Brian, the different facets -- when we implement, for example, advertising or we do something different on free transfers, we know kind of what we would expect to see.

We have some expectations of what we would see.

And when you look at each one of those individually added up, we saw a lift beyond what we would normally expect to see.

So I think that's something when you look at the sum of the parts, it's more than any individual component.

And what was the second part?

Oh, I'm sorry.

With regard to is it a new customer.

Is it -- just helping to drive that comp.

Is it a customer that maybe CarMax in the past would not have reached -- not have connected with?

Yes.

At this point, it's hard to tell.

And the only thing I would say is, we've seen some instances on home delivery that we probably are picking up some customers that maybe we wouldn't have because they physically couldn't have gotten into the store.

But this experience is much more than just home delivery.

And I think it's a better experience for the customers.

Your next question comes from the line of Craig Kennison from Baird.

Bill, you had mentioned that you had a modest share decline on the year.

That's a bit of a surprise given you opened 10% more stores.

What do you think caused you to struggle early in the year?

And then what changed to reverse it?

Well -- hey, Craig, just to clarify, I talked about comp growth.

Nationwide market share actually went up a little bit, but the comp markets went down a little bit.

And as I said in my remarks, we saw the decline earlier in the year and then we started to saw a reversal towards the latter half.

And I think we've been in an unusual pricing environment the whole quarter, really starting off in the first quarter of this year.

And different organizations manage through that differently.

Some may give up margin for sales, for example.

And our pricing elasticity tests wouldn't support that.

The other thing is, I just think that it's been a competitive environment overall.

Look, this is a good business to be in.

And I think the new cars are under a little bit of pressure.

And so I think we have some new entrants.

I think we have -- there's some more advertising, just more general noise overall in the marketplace.

So I think those are both contributing factors, especially early on as we saw different competitors pull different levers.

Your next question comes from the line of Rick Nelson from Stephens.

So Bill, can you talk about these 3 CECs that you're going to roll out?

The 300 associates per CEC, are you going to be able to pull out a like number of associates out of the stores?

Or how do you see that affecting expense?

Sure.

We absolutely expect to pull out a like number, at least a like number.

Again, what we've seen so far in Atlanta, if you think about the way that we staff a store currently, we staff it for, what we call, e-Office shifts, shifts where people take phone calls and follow up on eLeads.

We no longer have to staff that.

So we will get to the appropriate staffing levels in each store through normal attrition, so we would expect to offset the store staffing with what we have in the CECs.

And I think over time, this is a -- this will be a more efficient model because if you think about it, we have more than 7,000 sales associates across the country, and we're currently asking them all to be part time e-Office sales associates.

And some like it, some of them don't like it.

Some are good and some aren't so good.

So I think by leveraging folks that are very skilled at this, this is all they focus on, over time, will give us even more leverage.

Your next question comes from Scot Ciccarelli from RBC Capital Markets.

This is Beth Reed on for Scot.

I wanted to ask about online marketplaces, like CarGurus.

I know you guys have kind of indicated that changing up your merchandising on these sites and better advertising your quality message could help improve the price perception because in many cases, it doesn't seem like you're getting the credit you should be getting for your reconditioning processes.

So I was just wondering, one, how big of an impact do you think this is having on your sales; and then two, any color you can give around specific initiatives, if any, and time frame to improve your "value ranking" on these listing sites would be helpful.

Sure, Beth.

First of all, we feel good about our prices.

That being said, we're always making sure that we've got a good price perception.

We want to make sure that the customers understand the value of our cars.

So there's really 4 focus areas that we're working on, one of which you alluded to.

But first, we're focused more on the quality message and transparency on our website.

And we're already doing this.

As a matter of fact, we rolled out a new website nationwide at the latter part of the quarter.

We're also focusing more on quality and transparency on our non-website advertising, so TV, banners, retargeting, things like that.

The third thing, which is what you alluded to, is we're working with third-party listing sites to get the credit for our quality standards and the reconditioning that we do.

Most third-party websites, they don't factor any type of quality or condition into their algorithms.

Or if they do, it's not on a consistent basis.

So I feel really good about all those things.

We're making great progress.

And it may be a factor, but I just don't think it's -- to your other question, I just don't think it's had a major impact on overall comps.

Your next question comes from the line of Seth Basham from Wedbush Securities.

Bill, can you just give as an update on what your internal research has shown in terms of the price perception out there of your cars relative to the industry?

And then secondly, on your price test in Atlanta and otherwise, what you're learning from those?

Okay.

The first part of your question on just the research, what our research would tell you.

For example, on like a CarGurus, our most recent research would tell you that the majority of our cars are either fair or good or great.

And that's without any -- at this point, without any credit for the quality.

It will -- I'm sorry, what was the second part of your question?

The pricing tests.

Oh, yes.

The pricing tests that I noted, that's part of our normal pricing tests that we do all the time.

Look, we can drive more sales, absolutely, just by lowering our prices.

But again, it's that balance of optimizing our total gross profit dollars while also making sure that we're competitive in the marketplace.

And competitive in the marketplace doesn't mean on short-time periods like quarter-to-quarter.

We're looking for structural changes where we may not be competitive.

We just haven't seen that.

So we feel really good about where we are in price and what we're seeing on our pricing tests as far as normal elasticity.

Your next question comes from the line of Armintas Sinkevicius from Morgan Stanley.

I was curious about how much you had spent on marketing in Atlanta and how you plan to -- how much you plan to spend going forward.

And then just separately, any comments on the phasing of the launches for the omnichannel initiative through the course of this year?

Okay.

So marketing in Atlanta.

Atlanta is what we call high-awareness market.

If you think about what we spent is -- in conjunction with this, it would've been normal to like a GO if we're going to be going into Atlanta, which is a step-up, obviously, than what we were paying going forward.

As far as what we'll spend in additional markets, every market is going to be a little different -- different because it depends on the awareness and what we were previously spending there.

As far as the phases of rollout, like I said, we will get the second CEC opened early in the second quarter.

And in conjunction with that, we will start rolling out to additional stores, with Florida stores being first.

Beyond that, we'll update you next quarter the cadence of the other stores, the stores we already did by the end of the quarter as well as the future stores.

Okay.

And just so I'm clear, the marketing you've been spending in Atlanta, does that amount to essentially what you're planning to spend on a run rate basis?

Or will that step up as you sort of work through maybe the various kinks with the website and the market, et cetera?

Yes, no.

I think you should think about it more holistically as far as how much we spend in advertising on a per-unit basis.

And if you look at it year-over-year, I would expect FY '20 to be a -- there may be a little bit of an increase in the per-unit advertising expense overall because we do want to support our omnichannel rollout.

But -- so I would expect a little on a per-unit basis going forward.

Your next question comes from the line of John Murphy from Bank of America.

Just wanted to touch on one stat, just to make sure I had these numbers straight.

Bill, I mean, I think you mentioned the 0 to 4 portion of your sales was down to 72% versus 76% last year and 77% in the third quarter.

I just want to make sure I have that right.

And if we think below that, sort of what the percentages are.

And really, as you look at the market, I mean, vehicle quality has improved so dramatically in the last decade.

Could you consider going down a little bit further in the age spectrum because of the quality of the vehicle is going to be still really what you want to deliver to the customers, a nearly new used vehicle and it's just really sort of the tip of the iceberg might be much, much larger for you over time as you go down the age spectrum?

John, you do have those percentages right, the 72% versus the 76%.

And look, the beauty of this business model is we can sell what the customers are looking for.

And this quarter, we saw consumers that were interested in a little bit older vehicle.

I think part of that is because of the pricing.

Keep in mind, we're lapping -- if you look at year-over-year, this fourth quarter versus last year's fourth quarter, we had the largest step-up in mix-adjusted acquisition prices.

It was more than $500.

If you look at the quarter this year, we still had a little bit of an incremental bump up on that one that we had last year.

So prices are still expensive.

So I think what you're seeing is probably people just, from an affordability standpoint, moving down.

But you're absolutely right, we'll be able to care vehicles and sell them if that's what consumers are looking for.

But Bill, just one follow up.

I mean, isn't the beauty of that, that you might be able to have lower acquisition prices in the future with this high-quality product and still have the same dollar grosses and have a much more capital efficient business model?

Well, if we would -- if we continue to have older vehicles, our overall average selling price, you're absolutely right, would go down.

And gross would stay about the same, right, just based on your focus?

And what...

Absolutely.

Absolutely.

Your next question comes from the line of David Winston (sic) [David Whiston] from Morningstar.

Just a question with new vehicle sales coming down.

Is that all positive for you right now?

Is it greatly helping you to do more off lease supply and more budget conscious consumers you were just talking about?

Or do you think also consumer confidence is down marginally versus a year ago?

No.

I think -- I mean, if I look at the new car, I think it's been a pretty flat year for overall new car sales.

I think we've proven that in years where it goes up a little bit, years where it goes down a little bit.

We've been able to have success on both sides of that.

And as far as I can tell, consumer confidence is still very strong.

(Operator Instructions) Your next question comes from Chris Bottiglieri from Wolfe Research.

Given the comparisons on a tier basis to Atlanta's comp performance, outperformed the rest of the store base by similar amount as it did on a 1-year basis, then I guess thinking through that, is there any reasons why investors shouldn't extrapolate Atlanta's comp trend to the rest of the store base given your intentions to roll it out to all stores this year?

Yes.

Chris, Atlanta is one market.

And every single market is going to perform differently.

And the reason I say that is because we have experience in a lot of different markets.

And if you just look at the core business, each market performs a little differently.

So I don't think you can extrapolate what we see in this market versus what we're going to see in other markets, which is why I say, hey, remember, this is only 1 market.

And again, on the double-digit comp increase, we feel really good about that.

We feel like it's a lift above what we expected when we also compared it to the control group.

So we -- and it's not all due to omni.

As I have said earlier, there's a lot of different elements playing into that.

Your next question comes from the line of Seth Sigman from Credit Suisse.

I wanted to follow up on the expense growth.

So the 5% to 8% comps you need to leverage SG&A, I guess you said that's similar to 2018.

You also discussed being less efficient in the short term, right?

So how do I reconcile those 2?

And if there are some levers that maybe limit the negative impact from the investments, can you just sort of help us understand that?

Yes.

I think, Seth, the guidance on the 5% to 8% was really to help clarify a little bit of what we are saying because we were saying high, mid-single digit.

We put a little range on there.

And I think we put the range on because it's just -- somewhat depends on how much we get done and then also how much we can continue to offset through reprioritization and savings.

Was there another...

Well, I mean, maybe on the same point, if you could give us a sense on the time line of the investments throughout the year to the extent you can, particularly with the CECs rolling out in the second quarter.

Just how do we think about the cadence of maybe expense growth throughout the year.

Yes.

It's -- I'm not going to give any guidance on how I think it's -- we just have to wait and see.

It's going to be distributed throughout the year.

As I've said, well, the CEC there are going to be some additional expense, there are going to be some in the second quarter.

You're picking up some in there.

So I think you got to think about it on the whole year because there could be a little timing from 1 quarter to the next quarter.

Your next question comes from the line of Chris Bottiglieri from Wolfe Research.

Just a quick question.

You -- can you maybe just walk us through what it takes to convert an omnichannel market?

I think you're in 3 markets today.

And my guess is you're probably plan to get to 100 to 200 markets by the end of the year in February.

Maybe you can just walk us through kind of like what it takes to actually take your legacy store model and convert it to omnichannel.

Like, what are the technology steps, the training steps or whatever else it takes to convert the market would be helpful.

Okay.

First of all, Chris, thanks for getting back in line for the second question.

Listen, on the omni, there's 2 big things that have to be accomplished.

I mean, we've been setting the groundwork, as I said in my opening remarks, from a technology standpoint, that kind of thing.

But in addition to that, we have to get our customer experience centers opened because, obviously, that's a critical part of the whole omnichannel experience.

So that's one of the things that we have to continue to work through.

We feel good about the plan.

We feel very strong about our ability to get to what we've lined out there, which is by February of next year, having this offer to the majority of our customers.

The other thing is that there is this -- we've got 25,000 associates.

And Tom talked about it earlier, they are the key differentiators for us.

So this is going to be, obviously, a big change for them.

They're excited about it.

And they have been super helpful as in helping us figure this out as we've rolled it out.

What we have today is better than what we had in -- when we first rolled out Atlanta.

And that will continue to improve as we go forward.

But we have to make sure that they understand there's a lot of change management and what does it mean for them and how it's going to impact them and give the -- give them the ability to adjust for those changes.

So those are the big things in addition to a lot of the groundwork that we've been laying.

And just so everybody's clear, this is an iterative process.

This omnichannel experience is an experience that can meet every customer that's out there.

It's not meant for one segment versus another segment.

It's -- we should be able to serve every single customer and give them an unbelievable experience.

And that requires a lot of things that we already have.

So for example, the importance of our store.

I can't overstate how important it is that we have a physical presence, and that we continue to have a physical presence and increase that physical presence as we go forward.

So we're leveraging a lot of things that we already have.

Your next question comes from Ali Faghri from Guggenheim.

Just on the tax refund.

You called it out as a headwind in the fourth quarter.

Based on your historical experience, do you expect to get some of those lost volumes back in the first quarter as those refund net levels normalized?

Yes.

So the way I think about that is the same way I think about weather.

It's the timing.

And it, generally, will work itself back out.

And as I look at February, I think probably by our best estimate, there's about 7 -- about a week that we didn't see of tax refund benefits just because they were delayed in coming out really until the last part of the quarter.

There are no further questions at this time.

I now turn the call back to Bill Nash.

Great.

Thank you.

Listen, thank you all for joining the call today.

I really appreciate your support and your interest in CarMax.

I also -- I've got to thank our more than 25,000 associates.

Tom's talked about this.

I've talked about it.

They are the true differentiators for CarMax.

Our associates are the ones that are bringing this new customer experience to life.

I want to thank you all for what you do every single day, and we will talk again at the end of next quarter.

Thank you.

This concludes today's conference call.

You may now disconnect.