Richmond, Va. CarMax, Inc. announced that it is reducing its service-operations work force by more than 600 associates.
The reductions are being made in a majority of the company’s production superstores, where vehicles are reconditioned.
About a third of the reductions are being made in response to the company’s previously reported lower sales.
“Since Memorial Day, we have taken significant steps forward in aligning our costs with current sales levels,” said Tom Folliard, president and CEO. “Since that time, we have achieved our store-staffing objectives in most departments, but it was necessary to make further reductions in service operations in order to reach these staffing goals."
As part of the company’s long-term initiative to decrease costs in the reconditioning area, CarMax is restructuring its cosmetic operations, which resulted in the remaining reductions.
“We believe the steps represent important progress toward our multi-year goal of taking costs out of the reconditioning process while maintaining vehicle quality,” Folliard said. “This was a difficult but necessary decision for us to make.”
In connection with the reductions, the company estimates that it will incur approximately $7 million of severance costs, which will be included in selling, general and administrative costs in the third quarter ended Nov. 30.