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VOL. 129 | NO. 44 | Wednesday, March 05, 2014

AutoZone Grows Sales, Net Income in 2nd Quarter

By Andy Meek

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Whenever AutoZone Inc. chairman, president and CEO Bill Rhodes presents the company’s quarterly earnings to analysts, it’s never long before he starts talking about the weather.

RHODES

That’s understandable, because harsh or extreme weather can fuel sales of car parts that break or fail, boosting the bottom line of the Memphis-based auto parts retailer. Indeed, that trend was partly responsible for AutoZone’s sales gains in the second quarter, which the company released Tuesday, March 4.

The company reported net sales of $2 billion for the quarter, up 7.3 percent from the second quarter of fiscal 2013. Same-store sales, an important retail industry metric that measures sales at stores open for at least one year, were up 4.3 percent during the quarter.

“It seems I’ve spent a career talking about how weather, particularly extreme weather, drives positive trends for us,” Rhodes told analysts.

It probably didn’t need to be said in AutoZone’s hometown, at least, which is beginning to thaw out from several days of extreme cold, snow, ice and more as part of a particularly cold and unpredictable winter season.

Rhodes cited the weather as having a “significant factor” on the company’s latest earnings, as well as work the company is doing around inventory availability to capitalize on increased customer demand.

He said colder weather across much of the U.S. drove customer traffic related to sales of products like batteries and antifreeze, while AutoZone’s West Coast stores have seen less favorable conditions recently for parts repair.

Raymond James analyst Dan Wewer also cited the weather in a commentary he published after AutoZone’s earnings presentation, noting that “the company is benefiting from the extreme winter, which has resulted in higher sales in failure-related hard part categories.”

Among the second-quarter highlights, AutoZone reported its 30th straight quarter of double-digit earnings per share growth. Net income was up 9.4 percent to $192.8 million.

The company continued its share buyback program as well as opened more stores during the quarter, both of which have been the norm for much of recent memory. AutoZone opened 28 new stores in the U.S. and four new stores in Mexico, giving it a total of 4,871 stores in the U.S. as of Feb. 15, plus 367 stores in Mexico and four stores in Brazil for a total store count of 5,242.

The company also bought back 404,000 shares of common stock for $200 million during the second quarter, continuing its share repurchase program.

Meanwhile, Rhodes added that AutoZone has reoriented its focus to become more “digitally integrated” – that, in fact, the company has made it one of its strategic growth priorities.

“We believe this can be an important and significant opportunity for us to deepen customer relationships,” Rhodes said. “We’re focused right now more on data compilation and building a knowledge portal than on current sales.”

Late last year, Rhodes was talking publicly about how the company had spent 2013 making major “investments and enhancements” to its technology to allow AutoZone to better capture data about customer shopping patterns across all platforms. The company, he said, needs to get better at toggling between the in-store and online experiences to meet customer needs – and the company is working to get better at the latter in a variety of ways, including with things like its robust video library of how-to’s and repair walkthroughs.

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