CarMax investors filed a proposed securities class action in Maryland federal court Monday alleging its executives recklessly overhyped the used vehicle seller's growth potential and assured positive results for "years to come" when it should have known its sales bump was due to consumers purchasing cars ahead of anticipated tariffs.

In a 14-page complaint filed in the District of Maryland, Jason Cap accuses CarMax Inc. and its individual executives of violating the Securities Exchange Act in connection with materially misleading statements they made earlier this summer highlighting a growth in sales, gross profit and net earnings per diluted share.

CarMax's CEO and President William D. Nash was quoted in the company's June 20 release for the first quarter saying the positive results emphasize the strength of CarMax's earnings growth model, "which is underpinned by our best-in-class omni channel experience," where its associates, locations, technology and digital capabilities "provide the most customer-centric car buying and selling experience."

Nash went on to state that these were distinguishing factors in a large and fragmented market that positioned CarMax to continue driving up sales, gain market share and produce substantial year-over-year earnings growth "for years to come,"  the complaint says.

"In reality, defendants were in no position to assure that there would be positive results for 'years to come,'" Cap argues. "In fact, as defendants knew or should have known, CarMax's Q1 results were positive because of consumer speculation about tariffs (which motivated many to buy cars), and not a sign that CarMax's business was positioned to deliver 'significant year-over-year earnings growth for years to come.'"

During an earnings call held the same day the company's first quarter results were released, Nash and Enrique N. Mayor-Mora, CarMax's executive vice president and chief financial officer, were asked by an analyst how CarMax was interpreting the uptick in its business. Nash responded that some macro factors could have been behind the company's performance that quarter while remarking he believed it was also partly driven by factors the company could control.

In that call, Nash reiterated his comments in the previous quarterly call when there was an uptick amid tariff speculation toward the latter part of March and another climb in April, which ended up "being the strongest month for us," Cap says.

Nash stated that even before the initial climb, CarMax's business was doing well, which he said reflected the company's internal efforts, from inventory management, pricing, savings and the "omnichannel experience," the suit says.

In September, CarMax revealed its second quarter results during pre-market hours. It revealed that retail unit sales had dipped 5.4% and comparable store unit sales dropped 6.3% while wholesale units plunged 2.2%, according to the complaint. Net earnings per diluted share was 64 cents, compared to 85 cents at the same time last year, Cap says.

The Sept. 25 press release also quoted Nash conceding that the second quarter was a challenging one, the suit says. That same day, Nash held another earnings call during which he revisited his remarks from the company's first quarter call where he had discussed the growth in sales volume in the spring due to speculation about tariffs, Cap points out.

Nash explained that the uptick in the spring had affected CarMax's performance since it ramped up inventory before the second quarter to back the growth, the suit says. Then, CarMax saw approximately $1,000 in depreciation which impacted its price competitiveness and sales in the latter half of May through the end of June, according to the complaint.

CarMax's stock prices took a 20.07% dive, falling $11.50 per share, and closed at $45.60 per share Sept. 25, Cap says. He adds that the next day, stock prices fell again, this time, by 1.62% to close at $44.86, causing the investors to suffer significant financial hits.

The suit against CarMax comes two months after and investor sued raw materials supplier Dow Chemical Co., accusing the company of overstating its ability to navigate global economic challenges. In the suit filed in September, shareholder Jereth Camacho claims Dow leaders represented to the investing public that it was well-positioned to ride out macroeconomic and tariff-related headwinds and overstated the company's ability to maintain its profitability and dividend.

Camacho's suit claims that the company's executives and multiple board members made misleading statements about Dow's performance starting in January when it issued a press release announcing its financial results for fourth quarter 2024. That release said Dow delivered continued volume growth and that it was "optimistic" it would see further demand growth in various markets.

According to the suit, Dow continued making false statements about its ability to navigate the fluid tariff and economic situation, but a July 24 release reporting Dow's financial results for the second quarter of 2025 revealed it had suffered a 7.3% year-over-year decline in net sales, missing estimates by $130 million, leading common stock prices to drop.

A few weeks before Camacho filed his complaint, Todd A. Sarti filed a complaint arguing that the company's decision to reduce shareholder payouts earlier this year contradicted its earlier claims of its ability to withstand economic uncertainty, including tariffs.

Cap's two-count suit against CarMax asserts violations of Section 10(b) and Rule 10b-5 under the Exchange Act and Section 20(a) against CarMax's executives on behalf of a proposed class of all those who bought or otherwise acquired CarMax securities between June 20 and Sept. 24.

Cap asks the court to order CarMax to pay damages, attorney fees and costs to the investors, and to certify the proposed class and appoint Cap as class representative and his attorneys as class counsel.

Representatives for the parties did not immediately respond to requests for comment Monday.

Cap is represented by Phillip Kim of The Rosen Law Firm PA and Brian Schall of The Schall Law Firm.

Counsel information for CarMax was not immediately available.

The case is Jason Cap v. CarMax Inc. et al., case number 1:25-cv-03602, in the U.S. District Court for the District of Maryland.