Activist Starboard urges CarMax to overhaul digital sales, cut costs (updated)

Carmax

11/03/2026 14:58

Adds analyst comments in paragraphs 5,6,9

By Abhinav Parmar

March 11 (Reuters) - Activist investor Starboard Value on Wednesday urged CarMax's KMX.N incoming CEO Keith Barr to revamp the used-car retailer's digital platform and tighten costs, arguing that the company has "fallen well short of its underlying potential."

In a letter to Barr, Starboard, which holds a $350 million stake in the company, said simplifying CarMax's online trade-in process and improving conversion rates could help it regain market share as more consumers compare offers digitally.

The investor also called on CarMax to target selling, general and administrative expenses at 70%-75% of gross profit, saying tighter cost discipline would help it price vehicles more competitively and restore growth.

"We believe modest price reductions of approximately $100 to $300 per vehicle and combined with a more responsive, data-driven pricing system that adjusts in real time to local market conditions can restore competitiveness," Starboard said.

Analysts at Truist Securities agreed that CarMax has room to improve across several operational areas, but said the company trails rival Carvana CVNA.N in both mindshare and market share among customers seeking a fully or nearly fully online car-buying experience.

"Yes, some low hanging fruit likely exists, but it may be difficult to significantly improve mind/market share while sharply reducing costs," they said.

Starboard also nominated its own founder and CEO, Jeffrey Smith, to CarMax's board, along with Bill Cobb, chief executive of home warranties provider Frontdoor FTDR.O.

CarMax confirmed its board had received a notice from Starboard nominating two directors for election at its 2026 annual meeting. Board Chair Tom Folliard said the retailer's engagement with the activist investor had been constructive and that discussions were ongoing.

"If CarMax can get its flywheel moving again as Starboard talked about, then I think the stock would be drastically higher than it is today," Morningstar analyst David Whiston said.

Shares of the Richmond, Virginia-based retailer were down 0.4% in afternoon trading.

 (Reporting by Abhinav Parmar in Bengaluru; Editing by Krishna Chandra Eluri and Shilpi Majumdar)

 ((Abhinav.Parmar@thomsonreuters.com;))