NEW YORK, March 10 - Starboard Value has built a substantial position in CarMax and proposed two new directors for the company’s board, according to a source familiar with the matter. The activist investor is pressing the nation’s largest used-car retailer to enhance its digital user experience, tighten expenses and alter its pricing framework.
The investor now holds approximately $350 million of CarMax stock and has nominated Bill Cobb, the chief executive of home warranties provider Frontdoor, and Jeffrey Smith, Starboard’s founder and CEO, to join CarMax’s nine-member board, the source said.
Starboard conveyed its recommendations in a letter to CarMax’s chief executive, Keith Barr. The letter, seen by the source, argues that CarMax’s omnichannel platform - which combines retail and wholesale sales and is currently large enough to sell over one million vehicles annually - could achieve sustained share gains if the company improves its digital user experience, realizes greater cost efficiencies and adopts more dynamic pricing.
Barr, who served as chief executive of InterContinental Hotels Group from 2017 to 2023 and led a digital transformation there, received Starboard’s note on Tuesday, the source said. A representative for CarMax was not immediately available for comment.
Financial context cited in the letter and by the source underscores the scale of CarMax’s operations: the business sells in excess of one million vehicles a year through an omnichannel platform that generates more than $26 billion in revenue annually. Yet the company’s shares have weakened in recent months, with the stock down 43% over the past 12 months and most recently closing at $42.14 on Tuesday.
The move represents one of several recent Starboard initiatives. The hedge fund disclosed a separate position on Monday in Lamb Weston, the French fry supplier, and urged that company to accelerate and expand planned cost reductions, the source said.
Context and implications
Starboard’s nominations - a mix of external operating experience in the case of Bill Cobb and internal activist leadership in the case of Jeffrey Smith - signal the investor’s focus on governance alongside operational and commercial changes. The campaign underscores a triple emphasis: digital user experience improvements, tighter cost management and more flexible pricing to better compete in an omnichannel retail environment.
CarMax’s board currently comprises nine directors; Starboard’s additions would increase the investor’s influence if elected. The company’s publicly reported revenue scale and unit volume, combined with a significant share-price decline over the last year, frame the investor’s argument for change.
At this stage CarMax has not provided a public response to Starboard’s letter.