By Svea Herbst-Bayliss
NEW YORK, March 10 (Reuters) - Starboard Value has taken a stake in CarMax and nominated two directors to its board, urging the used car retailer to improve the experience of its digital users, cut costs and change its pricing structure, a source familiar with the matter said.
Starboard, one of the industry's busiest activist investors, now owns roughly $350 million worth of shares in CarMax and nominated Bill Cobb, the CEO of home warranties provider Frontdoor, and Jeffrey Smith,
Starboard's founder and chief executive, as directors, the source said. The company currently has nine directors.
The news was first reported by Bloomberg.
CarMax is the largest used car retailer in the U.S., selling over one million vehicles annually in retail and wholesale through a scaled omnichannel platform earning more than $26 billion in revenue a year. Its stock price has dropped 43% in the last 12 months and closed trading at $42.14 on Tuesday.
Starboard on Tuesday delivered a letter with its hopes for the company to CarMax CEO Keith Barr, who led a digital transformation and enhanced the customer experience when he served as chief executive at of InterContinental Hotels Group from 2017 to 2023.
Starboard told Barr and the CarMax board that the company's superior omnichannel can deliver sustained share gains with an improved digital user experience, improved cost efficiencies, and more dynamic pricing, the source who has seen the letter said.
A representative for the company was not immediately available for comment.
This is the second time in two days that a new Starboard position has been revealed. On Monday, the hedge fund said it now owns shares in French fry-maker Lamb Weston. It urged the company which supplies McDonald's French fries, to double its planned cost cuts and move more quickly on adopting other changes that may already be in the works.
(Reporting by Svea Herbst-Bayliss; Editing by Tom Hogue and Lincoln Feast.)
