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VOL. 126 | NO. 238 | Wednesday, December 07, 2011

AutoZone Q1 Profit Improves 11 Pct.

By Andy Meek

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Memphis-based auto-parts retailer AutoZone Inc. keeps riding its business model to ever-higher growth, posting an 11 percent jump in its fiscal first-quarter profit and beating Wall Street’s earnings-per-share expectation.

(Photo: Brandon Dill)

The company, which is the leading auto-parts retailer in the U.S., reported profit of $191.1 million Tuesday, Dec. 6, up $19 million over the same period last year.

Earnings per share increased 24 percent to $4.68 from $3.77 during the year-ago quarter. That marks the retailer’s 12th straight quarter of at least 20 percent earnings-per-share growth and the 21st straight quarter of double-digit earnings-per-share growth.

The results beat the forecast of Wall Street analysts, who had expected the company to report earnings of $4.44 per share.

Domestic same-store sales – sales at stores open at least one year – increased 4.6 percent for the quarter. Also during the quarter ended Nov. 19, AutoZone opened 17 new stores in the U.S. and 2 in Mexico.

That brought the company’s store count as of Nov. 19 to 4,551 stores in 48 states, the District of Columbia and Puerto Rico, as well as 281 stores in Mexico.

Also during the quarter, AutoZone repurchased $310 million worth of the company’s common stock, leaving $659 million remaining under its current share-repurchase authorization. And AutoZone cut its operating expenses slightly because of lower incentive compensation, favorable legal expense and leverage from higher sales volume.

“While our financial performance has been solid, we take nothing for granted,” said AutoZone chairman, CEO and president Bill Rhodes.

As an example of that, Morningstar Inc. analyst Liang Feng said in an analyst note posted after the company’s quarterly earnings conference call with analysts that AutoZone can be expected to continue opening about 150 stores a year to take market share from smaller, independent retailers.

Feng also said he believes management will focus on continuing to grow the commercial division, a point Rhodes also made during the call.

“We are optimistic about growth prospects in this industry, since AutoZone, in our view, can take market share from smaller participants by successfully leveraging its existing store base and distribution infrastructure to grow profitability,” Feng wrote. “As the firm implements best practices from existing commercial centers, we believe AutoZone can expand commercial centers to approximately 70 percent of stores, which should increase asset productivity and generate high returns on new invested capital.”

The company’s inventory during the quarter increased 7.2 percent over the same period last year, driven by new stores and continued investment in parts assortment. Along those lines, Rhodes said the company is communicating more frequently with its stores to stay abreast of ground-level activity.

“The more we understand about our customers’ shopping and buying patterns, the better we’ll be able to service their needs and help them buy what they want,” he said.

Rhodes also acknowledged that gas prices remain a headwind for the company’s business and that customers are continuing to manage their expenses very closely.

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RECORD TOTALS DAY WEEK YEAR
PROPERTY SALES 64 296 16,341
MORTGAGES 89 356 21,366
FORECLOSURE NOTICES 6 61 4,251
BUILDING PERMITS 199 701 39,202
BANKRUPTCIES 50 234 15,482
BUSINESS LICENSES 21 78 5,471
UTILITY CONNECTIONS 54 354 23,505
MARRIAGE LICENSES 8 78 5,018

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