CarMax opens Northern Va. store Used-auto seller aims to match success of Laurel shop, its best


September 23, 1998|By Ted Shelsby | Ted Shelsby,SUN STAFF

STERLING, Va. -- CarMax opened its 24th used-car super store here yesterday with hopes that it will match the success of its 13-month-old Laurel store.

"[Laurel] is not just our best store," W. Austin Ligon, president of CarMax, said during an interview at the grand opening of its first Northern Virginia outlet. "It's the No. 1 used-car location in the country."

CarMax bases its claim on a Ward's Dealer Business Magazine survey of the top 500 car dealers in the country.

"The average store sells about 400 cars a month, or about 5,000 a year," Ligon said. "Laurel does a little better than twice that amount."

While CarMax, the automotive arm of Circuit City Stores Inc., is still struggling to make money, Ligon said the Howard County car lot is "profitable, very profitable."

He declined to say just how profitable, not wanting to pass on proprietary information to competitors, including Republic Industries Inc., the Fort Lauderdale, Fla.-based mega dealership founded by billionaire entrepreneur H. Wayne Huizenga.

Last month, Republic disclosed plans for two huge AutoNation USA used-car stores in the Baltimore area and four near Washington.

Ligon said the Baltimore/Washington market is one of the biggest and most attractive in the nation for retailers.

"There are 8.5 million people within a 40-mile drive of our Laurel store," he said. "Half of them are within 25 miles, and they have a higher average income than residents of most other parts of the country."

CarMax is moving to secure its position in the market. Over the next two or three years, Ligon said, the company would like to add two or three more used-car lots in the region, in addition to its White Marsh outlet that is scheduled to open in November.

"We would like to have something on the west side of Baltimore, and we are looking at sites in Montgomery County," he said. "Fairfax County [Virginia] is another area we are looking at."

Such a cluster, analysts say, is needed to give CarMax the critical mass of stores needed for a profitable operation.

CarMax posted a loss of $34 million for the fiscal year ended in February and is not expected to break into the black until next year.

"One of the big mistakes they made was not establishing a critical mass of stores in some of their markets," said Tom Thomson, an analyst with Wheat First Union in Richmond, Va.

Thomson said CarMax opened only one store each in Miami, Dallas and Houston, and didn't advertise enough, hurting sales. "It costs about the same to advertise for three stores as for one," said Thomson.

Ligon agreed. "That's our criticism of ourselves," he said. Learning from its mistakes, he said CarMax will delay its move into Los Angeles until it can open three stores in a short period of time.

"Sure, they've made some mistakes," said Kenneth M. Gassman Jr., a retail analyst with Davenport & Co. in Richmond, "but they are selling a lot of cars and their customer satisfaction rating is extremely high. They are going to make money. The only question is when."

Pub Date: 9/23/98

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