Activist shareholder Starboard Value on Wednesday called on used-car retailer CarMax to remake its digital transaction flow and impose stricter cost controls, saying the company has "fallen well short of its underlying potential." In a letter directed to incoming CEO Keith Barr, Starboard laid out a series of recommendations aimed at improving online conversion and restoring growth.
Starboard recommended that CarMax simplify the online trade-in experience and boost conversion rates to reclaim customers who increasingly compare offers online. The investor said these improvements could help CarMax win back market share as buyer behavior shifts toward digital comparison.
In addition to changes to the online platform, Starboard urged the company to target selling, general and administrative expenses at 70% to 75% of gross profit. The firm argued that tighter cost discipline would allow CarMax to price vehicles more competitively while supporting a return to 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.
Starboard also proposed two board nominees: Bill Cobb, chief executive of Frontdoor, and Jeffrey Smith, Starboard's founder and CEO. The nominations are presented as part of the investor's push to change CarMax's strategic direction.
The letter noted potential operational efficiencies from recent advances in artificial intelligence. Starboard suggested AI could streamline workflows, reduce manual tasks, improve customer interactions and help CarMax move away from legacy management systems.
Starboard holds a stake in CarMax valued at about $350 million. The investor's recommendations span product experience, pricing, cost structure and governance.
Additional commentary in the original filing referenced the use of AI-driven stock evaluation tools. One such tool evaluates CarMax against thousands of other companies across more than 100 financial metrics and identifies opportunities based on fundamentals, momentum and valuation. The commentary cited prior notable stock picks by that tool, including Super Micro Computer (+185%) and AppLovin (+157%).
Starboard's proposals focus on customer-facing digital improvements, tighter SG&A targets and governance changes, with the stated aim of restoring CarMax's competitiveness in an increasingly digital used-car market.