AutoZone Posts 7.2 Percent Gain in Profit

By Andy Meek

Memphis-based AutoZone Inc. saw its profit rise 7.2 percent during the company’s just-ended fiscal first quarter, a strong start to the company’s new year that equated to a $14.6 million increase in net income over the same period in 2012.

Memphis-based AutoZone Inc. saw its profit rise 7.2 percent during the company’s just-ended fiscal first quarter, a strong start to the company’s new year.

(Daily News File/Lance Murphey)

AutoZone’s announcement Tuesday, Dec. 10, of the quarter’s results came about a week before it holds its annual meeting of stockholders in Memphis Dec. 18.

During the quarter, the company’s diluted earnings per share were up 16.2 percent, representing the company’s 29th straight quarter of double-digit earnings per share growth. The last time AutoZone saw a quarter in which it grew earnings per share by less than double digits, in other words, was in 2005.

Also during the quarter, the company’s domestic same-store sales, which tracks sales at stores open at least a year, were up almost 1 percent. Same-store sales are a closely watched metric in retail, because they provided a clearer picture of growth separate from opening and closing stores.

An analyst note from Raymond James pointed to the quarter’s relatively weak same-store sales, which it said were “tepid as warned.”

In a statement about AutoZone’s quarterly results, AutoZone chairman, president and CEO Bill Rhodes said the company has been focused recently on several strategic initiatives.

“We are currently deploying updated and expanded inventory assortments across our domestic stores based on our recently enhanced models,” Rhodes said. “In our commercial business, we opened over 100 new commercial programs in the quarter, significantly higher than the openings we had this time last year. Additionally, we rolled out an exciting, new version of our electronic parts catalog, and we grew sales across our digital commerce businesses.”

The company, he added, also is testing other initiatives to help enhance inventory availability.

Around the time AutoZone officials were walking analysts through the quarter’s results Tuesday, the company’s stock hit a 52-week high. Shares closed Tuesday at $471.86, up 3.17 percent from Monday's closing price of $457.34.

During the quarter, which ended Nov. 23, AutoZone opened seven new stores in the U.S., one new store in Mexico and one in Brazil. As of Nov. 23, the company had 4,843 stores in the U.S., 363 stores in Mexico and four stores in Brazil, for a total of 5,210.

The company also is pressing forward with its share buyback program, for which the company has $177 million remaining under its current share repurchase authorization. During the quarter, AutoZone repurchased 678,000 shares of its common stock for $292 million, at an average price of $430 per share.

On Dec. 10, for comparison, trading in AutoZone shares opened at nearly $470 per share.

Rhodes told analysts during the company’s presentation of the quarter’s results that AutoZone’s goal is to grow market share in 2014. It is coming off a strong 2013, during which the company opened 153 new stores, sales topped $9 billion – up 6.3 percent from the prior year – and net income for the year was $1 billion.

According to Rhodes, topping $9 billion in sales in 2013 was a milestone for the company, as was crossing $2 billion in EBITDA – an acronym for earnings before interest, taxes, depreciation and amortization.

“Over the last several months, we have significantly increased the pace of strategic assessments, design potential enhancement, deployment of tests and implementation of new concepts or initiatives,” Rhodes said. “This is vitally important work. It is intellectually stimulating, but it's also very hard work.

“Overall we can't control the macro factors that impact our business, and that is why we have intensified our efforts on enhancing our offerings. Ultimately we control our destiny, and we are excited about the many initiatives we have underway or in tests.”