'A big opportunity': Activist Starboard takes stake in used car retailer CarMax

Activist investor Starboard Value has acquired about $350 million worth of shares in CarMax, a mid-cap retailer of used cars. With the arrival of a new chief executive, the company faces a “timely opportunity to address fixable execution gaps and unlock CarMax’s full value potential,” the activist said.

Starboard Value bought roughly $350 million of CarMax stock and nominated two candidates to the company’s board: Starboard CEO Jeff Smith and Bill Cobb, CEO of Frontdoor, a company that provides subscription-based home repair services, Bloomberg reported.

Starboard said the appointment of new CEO Keith Barr, who previously ran InterContinental Hotels Group, represents a “timely opportunity to address fixable execution gaps and unlock CarMax’s full value potential,” a filing by the activist investor said. The used-car retailer dismissed its previous CEO, Bill Nash, late last year. Bloomberg linked the move to the retailer’s weak financial performance. According to the company’s results, in the third fiscal quarter, which ended November 30, 2025, CarMax’s total net sales and operating revenues fell almost 7% to $5.8 billion.

CarMax, founded in 1993, describes itself as the largest seller of used cars in the U.S. The company “kind of revolutionized used car sales and made it something that was a much better experience for consumers,” Smith said in an interview with Bloomberg Deals on Tuesday, a transcript of which was attached to the activist's filing. However, competition has intensified over the years, particularly through online sales, with new players emerging, such as Carvana.

From Starboard’s perspective, CarMax remains well positioned because it combines physical stores with a digital platform. “They have the benefit of the omnichannel footprint. They have over 250 locations, physical locations where you can go and test drive cars and touch and feel and see those cars, and they have the digital front end,” Smith said.

“I don’t know that you would build this business today with all of those assets, but we don’t really have to pay for it as shareholders. They’re there, you’re paying tangible book value for a business with all of these assets. And now if you can make it sing, you have the best of both worlds,” he added.

Responding to Starboard’s letter, CarMax Executive Chair Tom Folliard said the company “has been taking the necessary steps to ensure that this business delivers on its potential and is responsive to shareholders.” He added that the company’s engagement with Starboard “has been productive and we remain focused on continued constructive conversations.”

Markets reacted to the news without much enthusiasm: on Tuesday, CarMax shares rose less than 1% to $42.50 per share. In early trading on Wednesday, the stock was basically flat.

The company’s shares have 15 “hold” ratings from Wall Street analysts, versus four “sell” and only three “buy” recommendations. The average target price is $34.25 per share, which is below current quotes.