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VOL. 127 | NO. 184 | Thursday, September 20, 2012

AutoZone Income Rises 7.4 Percent

By Andy Meek

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Memphis-based auto parts retailer AutoZone Inc. is in a rare club among publicly traded retail companies: It’s in a position to rack up strong same-store sales and earnings per share growth regardless of the economic cycle.

That’s according to Raymond James & Associates analyst Dan Wewer, and that fact also was underscored Wednesday morning before the stock market’s opening bell. AutoZone has met or beaten analyst expectations for the last several quarters, and the company did so again, reporting fiscal fourth-quarter profit growth of 7.4 percent.

Profit for the quarter increased $22.3 million, or 7.4 percent, over the same period last year to $323.7 million. Wall Street was expecting earnings per share growth to increase to $8.45, and AutoZone hit that mark, racking up EPS growth of $8.46 in the quarter.

AutoZone said its revenue at stores open at least a year increased 2.1 percent. The metric is an important one in the retail world, because it separates the growth effects of opening new stores from sales at existing stores.

“We are pleased to report our 24th consecutive quarter of double-digit earnings per share growth,” said Bill Rhodes, AutoZone chairman, president and CEO. “For the year, we reached many new milestones which included opening our 5,000th store in Alaska. We also improved our return on invested capital, achieving 33 percent at year-end. While our same-store sales performance was below our expectations for the quarter, we are confident we are well positioned to again deliver strong results for our new fiscal year.”

As Rhodes noted, sales came in light during the quarter, with the company’s top-line growing 4.6 percent (below Wewer’s forecast of 5.4 percent) versus 8.6 percent a year ago. “Do-it-for-me,” also referred to as DIFM, sales at AutoZone increased 16 percent during the quarter, the first quarter of less than 20 percent sales growth at AutoZone in the past nine quarters, according to Wewer.

“In our view, the deceleration seen in DIFM growth could just be a victim of the law of large numbers,” Wewer told clients in an analyst note Wednesday. “AutoZone’s growth within the channel remains the fastest in the industry. Further, we believe the company may be taking commercial share from Advance Auto Parts and O’Reilly Automotive through sharper pricing of its private label assortment.”

Revenue also rose during the quarter, though it didn’t meet analyst expectations. Revenue rose 4.6 percent to $2.76 billion from $2.64 billion, while analysts expected $2.8 billion.

The company opened 72 new stores during the quarter, relocated 2 stores in the U.S. and opened 24 new stores in Mexico, giving it a grand total as of Aug. 25 of 5,006 stores in 49 states, Washington, Puerto Rico and Mexico.

AutoZone shares were up about 3 percent in morning trading.

The Associated Press contributed to this report.

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