If Starboard's $300 million savings estimate is real, why didn't the last three leaders find it?
If Starboard's $300 million savings estimate is real, why didn't the last three leaders find it?
Starboard Value disclosed a roughly $350 million stake in CarMax on March 11 and nominated two directors: its own CEO Jeffrey Smith and Frontdoor CEO Bill Cobb. The thesis: better digital conversion, sharper pricing, and roughly $300 million in operating cost reductions.
Five days later, Keith Barr started as CEO. He replaced interim CEO David McCreight, who stepped in when former CEO Bill Nash stepped down. Tom Folliard remains Interim Executive Chair. That's three different CEOs in a matter of months, plus an interim Chair.
Starboard is aligned with Barr, not campaigning against him. The firm said it's "optimistic the former IHG CEO can be a catalyst for change."
Barr ran InterContinental Hotels Group (IHG), a franchise-driven business with over 6,000 properties across 100-plus countries. IHG collects fees from hotel operators rather than owning and running properties itself. CarMax is the opposite: vertically integrated, capital-intensive, with owned inventory that depreciates, reconditioning costs that compound, and roughly 250 locations generating $26 billion in revenue.
CarMax had already begun pursuing digital improvements and cost efficiencies before Starboard arrived. The deeper question is why those efforts didn't yield tangible results and why anticipation of future improvements hadn't moved the stock.
The stock is down roughly 40% over the past year. Market cap sits near $5.4 billion. Last quarter: a $121 million net loss and a $141 million goodwill impairment.
Starboard's $300 million figure is Starboard's estimate, not independently verified. For a company that posted a net loss last quarter, even half of that in recurring savings would transform the earnings profile. But the gap between identifying savings in a presentation and extracting them from a capital-intensive operation is where most activist theses stall.
CarMax posted a $121 million loss last quarter. Starboard says $300 million in savings is available. Keith Barr has never run a business where inventory depreciates on the lot. Which of those three facts will matter most twelve months from now?
🔗 Source: Starboard Nominates Two to CarMax Board, Unveils New Position
