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  "documentTitle": "CarMax Inc. (KMX)",
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  "authorName": "Jeffrey Smith",
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  "presentationDate": "2026-03-10 00:00:00",
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  "notes": "The text explicitly references a 'flywheel' concept and advocates for a specific SG&A target of 70-75% of gross profit.",
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      "text": "Specifically, we encourage targeting SG&A to 70% to 75% of gross profit, with a strong preference for the achievement of 75% as soon as possible and approaching 70% as expeditiously as practical thereafter.",
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      "text": "SG&A as % of gross profit: 70% to 75%",
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      "text": "This is a business where gross margins are inherently constrained. In that context, every dollar of SG&A matters disproportionately. If competitors operate more efficiently, they can reinvest in price, marketing, or customer experience and pressure the Company’s margins. This profitability engine enhances the flywheel. CarMax cannot allow inefficiency to become a strategic disadvantage. We believe the Company should commit to making SG&A as lean as possible. It is foundational to the business model of CarMax.",
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      "text": "We believe there is substantial opportunity to rethink SG&A through a true zero-based budgeting lens. The world today is dynamically and rapidly changing. If CarMax aspires to be a winner for decades, the Company cannot afford structural inefficiencies.",
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      "text": "To reinforce accountability and signal discipline, we believe you should formally establish and communicate a clear SG&A target, along with a defined and credible path to achieve it. Specifically, we encourage targeting SG&A at 70% to 75% of gross profit, with a strong preference for the achievement of 75% as soon as possible and approaching 70% as expeditiously as practical thereafter. While prior management targeted \"mid-70s\", it was not pursued with sufficient rigor. Notably, CarMax historically operated within this range prior to the pandemic, before SG&A levels increased meaningfully in subsequent years as",
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      "text": "AI presents a meaningful opportunity to rethink workflows, reduce manual processes, enhance customer interactions, streamline decision-making, and migrate from ineffective legacy managerial systems. At the same time, disciplined operational execution (blocking and tackling across product, marketing, call center operations, and corporate overhead) can unlock meaningful savings and advantages to help compete in today’s marketplace. While the customer experience must remain paramount, we believe cost discipline and customer satisfaction are not mutually exclusive. In fact, we believe meaningful SG&A reductions can be achieved without compromising, and likely enhancing, the customer experience. We believe a rigorous zero-based review can identify significant cost opportunities. This is not simply about margin expansion. It is about protecting the durability of the business and creating the flexibility to price more competitively, invest in customer-facing capabilities, and drive sustainable share gains.",
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