Chanos said to short CarMax as automakers report mixed sales

As the major automakers issued mixed reports on their February performance Wednesday and spurred renewed talk of whether aggressive promotions signal a coming turn in their business cycle, a decidedly cautious interview with noted short seller Jim Chanos made its rounds among trading desks, leading to a brief plunge for CarMax (KMX) as CNBC identified the stock as one of Chanos' latest short positions. CHANOS CAUTIOUS ON AUTOS: In an undated interview with Canadian non-profit Capitalize for Kids, famed short seller Jim Chanos of Kynikos Associates said, "I do think we are sort of where we were in '05... We've been at this sort of 17M [seasonally adjusted annual rate] now for a while and what we're seeing is what you would classically see. You see more incentives. You're seeing car manufacturers beginning to cut plant production on the margin. We see more aggressive use of credit, lengthening lease terms, lowering residuals... I think this will be one area in particular that a run up in rates would probably hit hard." Asked to name a specific stock to express that sentiment, Chanos said, "I'm not going to disclose that. However, at the peak of the cycle the company was earning about 6% on their capital. It's a giant company in the industry. It's not one of the OEMs and has a finance arm. It earned below its cost of capital when things were good. What's going to happen when things are bad?" CNBC NAMES CARMAX AS CHANOS SHORT: As the Chanos interview circulated among investors, CNBC's Scott Wapner reported shortly before noon that Chanos recently took a short position in CarMax. FEBRUARY AUTO SALES: Today's reports surrounding CarMax come alongside monthly numbers from the major automakers. GM (GM) grew domestic unit sales 4% to roughly 237,000 last month, while Ford (F) and Fiat Chrysler (FCAU) U.S. sales in February fell 4% and 10%, respectively. General Motors noted that "all of our brands grew their average transaction prices by healthy amounts," adding that "GM internal data shows that incentive spending was essentially flat year over year. This is in sharp contrast to recently published [JD Power] PIN estimates that noted an increase of 2.7 percentage points to 15% of [prices]." Weighing in on the February numbers, the Wall Street Journal's Adrienne Roberts contended Tuesday that carmakers "slapped steep discounts on vehicles in an attempt to reduce gluts on dealer lots amid sagging demand," with JD Power saying incentives per vehicle in February reached $3,830, the highest since 2009, as inventories "swelled" to 70 days. FORD SAYS COMFORTABLE WITH INVENTORY: Speaking on the company's February sales conference call, Ford executives said, "We again saw some industry incentive spend levels that were a bit higher than a year ago... there were some categories such as full-size pickup where we did see some very aggressive incentive increases from key competition." On its inventory levels, Ford said, "We think we're very well positioned right now at 79 days... heading into spring selling season." PRICE ACTION: After briefly dipping below $63 following news of Chanos' short position, shares of CarMax are up 1.2% to $65.29 ahead of session close. GM, Ford, and Fiat Chrysler are each up between 1% to 2%, roughly in-line with the S&P's 1.4% advance.