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VOL. 129 | NO. 102 | Monday, May 26, 2014

AutoZone Quarterly Profit Rises 7.4 Percent

By Andy Meek

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Memphis-based AutoZone Inc. has enjoyed double-digit earnings per share growth every quarter since the latter part of the administration of President George W. Bush – 31 straight quarters, to be precise.

In the three-month period ended May 10, AutoZone reported a profit of $285.2 million, equating to $8.46 a share. That’s up from $265.6 million, or $7.27 a share, one year earlier, a 7.4 percent gain.

(Daily News File/Brandon Dill)

The earnings reported Tuesday, May 27, by the leading auto parts retailer in the U.S. continued that trend, with the company reporting earnings per share growth of 16.4 percent.

In the three-month period ended May 10, AutoZone reported a profit of $285.2 million, equating to $8.46 a share. That’s up 7.4 percent from $265.6 million, or $7.27 a share, one year earlier.

Net sales for the quarter were $2.3 billion, up 6.2 percent from the year-ago period, and domestic same-store sales grew 4 percent during the quarter. Same-store sales is an important retail industry metric that helps present an accurate measure of a business’ growth by removing the effect from stores that have opened or closed within the past year.

Sales at AutoZone were in line with analyst expectations, and the earnings of $8.46 a share beat the consensus estimate of $8.44. AutoZone chairman, president and CEO Bill Rhodes told analysts the company’s sales performance was in line with the second quarter, when net sales were $2 billion and same store sales were up 4.3 percent.

Failure-related parts categories were particularly strong in the second quarter, thanks to particularly nasty weather, but the just-ended third quarter saw a rebound in the deferrable maintenance categories, Rhodes added, saying the company expects that trend to continue through the summer. Deferred maintenance refers to maintenance activities that have been delayed because of things like cost-cutting.

“Our inventory availability test initiatives continue to show promise, although we still have significant testing to complete before we determine our long-term approach,” Rhodes said. “As we have routinely stated, we will remain committed to our disciplined approach to growing operating earnings and utilizing our capital effectively.”

Raymond James analyst Dan Wewer, in a commentary he published after AutoZone’s earnings presentation, argued that the company’s results for the quarter are consistent with a bullish long-term view of the company. A continued gross margin expansion cycle and a shareholder friendly capital allocation policy are some of those long-term investment themes that remain intact, he wrote.

A further testament to his bullish view on the company, he noted, is the more than 10 percent earnings per share growth that AutoZone has now hit for the 31st straight quarter.

Regarding the capital allocation Wewer referred to, AutoZone during the just-ended quarter continued its long-running share repurchase program, buying back 795,000 shares of its common stock for $420 million during the quarter. Year-to-date, the company has bought back a little less than 2 million shares of its common stock for $912 million, and at the end of the third quarter the company had $307 million remaining under its current share repurchase authorization.

As is usually the case during the quarter for AutoZone, the company also expanded its corporate footprint. During the 12-week period ended May 10, AutoZone opened 30 new stores in the U.S. and seven new stores in Mexico.

That brings the total as of May 10 to 4,901 AutoZone stores in the U.S., Washington and Puerto Rico, 374 in Mexico and four stores in Brazil, for a total store count of 5,279. That’s an increase from the second quarter’s total store count of 5,242.

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