Shares of automotive retailer Lithia Motors (NYSE:LAD) fell 6.1% in the morning session after investor sentiment soured on the used-car retail sector as competitor CarMax reported weak second-quarter results that missed expectations.

CarMax, a major industry player, announced that its profit and sales for the quarter ending August 31 fell short of analyst forecasts. The company's used-car sales dipped 7.2% to $5.271 billion, and same-store sales dropped by 6.3%. CarMax's earnings per share came in at 64 cents, significantly below the expected $1.04. The poor performance from a key competitor raised concerns about challenging market conditions for the entire used-car industry, weighing on shares of peer companies. Separately, it was reported that Lithia sold its BMW Portland dealership to Swickard Auto Group.

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Lithia’s shares are somewhat volatile and have had 11 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.

The previous big move we wrote about was 30 days ago when the stock gained 3% on the news that the company announced a significant expansion of its share repurchase program.

Lithia's Board of Directors approved a $750 million increase to the plan, bringing the total repurchase capacity to $1.08 billion. A share buyback is when a company purchases its own outstanding shares to reduce the number available on the open market, which can increase the value of the remaining shares. This action often signals management's confidence in the company's future. President and CEO Bryan DeBoer stated the move underscores a "long-term conviction in LAD's strategy" and a belief that its shares are trading below intrinsic value, making repurchases an "attractive and value-accretive" use of capital for shareholders.

Lithia is down 8.9% since the beginning of the year, and at $317.73 per share, it is trading 19.4% below its 52-week high of $394.27 from November 2024. Investors who bought $1,000 worth of Lithia’s shares 5 years ago would now be looking at an investment worth $1,456.

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