Its 21 new-car franchises helped nail down CarMax's first net profits for two consecutive quarters.

Yet CarMax President W. Austin Ligon says the Circuit City division will keep focusing on its core area over the past six years - used vehicles.

"New cars still account for less than 35% of CarMax Group sales," Mr. Ligon says. "But we do need more superstores in metro markets, because customers there will drive no more than 15 miles to a dealership, whereas they'll go up to 25 miles in mid-size markets."

For the first half of the 2000 fiscal year, CarMax reported net earnings of $6 million. This compares to a net loss of $6.2 million for the same period of fiscal 1999. CarMax lost $23.5 million for the latest fiscal year.

"The first-half profits were driven by improved profitability of our used-car superstores and continued strength of our new-car franchises," says Richard L. Sharp, chairman and CEO of Circuit City.

Mr. Sharp cautioned that it will be tougher to sustain the profit string into the second half, "which is the slower season of the year for auto sales."

CarMax now has 37 locations. Thirty two are used-car superstores carrying 16 new-car franchises. There are five franchised new-car dealerships separate from used-car superstores. The first two new-car franchises - Chrysler-Plymouth-Jeep - were acquired in 1997.

Mr. Ligon says CarMax is testing home delivery of cars at its Los Angeles new-car store and planning an Internet site on which vehicle prices can be checked.

"CarMax started the super-store movement in 1993, with its first location in its home town of Richmond, VA," says Prof. George Hoffer, economist at Virginia Commonwealth University. "That raised the standard of consumer service for all dealers, new and used."