AutoZone Beats Forecast in Third Quarter

By Andy Meek

AutoZone Inc.’s just-ended fiscal third quarter results show why it’s a rarity among public companies.

AutoZone Inc. reported net sales were $2.2 billion in the just-ended fiscal third quarter, and profit was up 6.8 percent to $265.6 million. 

(Daily News File Photo: Lance Murphey)

The Memphis-based auto parts retailer – the nation’s largest in the sector – is an earnings machine. Net sales were $2.2 billion for the quarter, and profit was up 6.8 percent to $265.6 million. The quarter also included AutoZone’s 27th straight period of double-digit earnings-per-share quarterly growth.

The company keeps executing shareholder-friendly moves, such as the 833,000 shares of common stock AutoZone bought back during the quarter.

Wall Street likes the company. AutoZone’s stock hit a 52-week high Tuesday, May 21, during the morning presentation by company executives to analysts. The quarter’s results, which included earnings per share of $7.27, also beat Wall Street’s consensus estimate of $7.21.

Bondholders also are drawn to the company because of its strong credit rating. Moreover, the company’s executives repeatedly stress during earnings presentations to analysts that they are working to position the company to be able to thrive no matter the macroeconomic climate – in good times and bad.

The company’s execution isn’t perfect. During the just-ended quarter, for example, domestic same-store sales – which measures results from stores open at least one year – were down 0.1 percent. AutoZone is attributing that partly to the weather and to consumers still keeping a tight lid on their expenses.

The company is now heading into its all-important summer selling season. And AutoZone chairman, president and CEO Bill Rhodes said that while the company still has some concerns about the health of consumer spending because of economic sluggishness and the reinstitution of the payroll tax, AutoZone is projecting an improvement in sales for the remainder of the year.

“The hardest things to predict for us are macro factors and in particular the weather,” Rhodes told analysts. “We can’t control the weather, and over time its effects even out.

“Our organization executed our game plan and delivered another quarter of solid performance. While sales results for the quarter finished below our expectations, we were pleased to see noticeable improvements in our performance during the final four weeks of the quarter.”

Rhodes added that the U.S. vehicle population remains at an all-time high and consumers still are scouring for good value as they maintain their vehicles, which should help AutoZone’s opportunities grow.

The way AutoZone chief financial officer William Giles put it is that the company is positioned both to grow and to capture market share.

Raymond James’ equity research unit has a “strong buy” on the company’s stock. In a note to clients, Raymond James analyst Dan Wewer said that AutoZone’s “commentary on improving sales trends in April adds confirmation that an industry-wide sales recovery is likely underway.”

According to Morningstar Inc. analyst Liang Feng, the spring 2012 quarter was a relatively tough comparison for AutoZone and other auto parts retailers, since the warm winter pulled forward maintenance spending in some markets. Feng also expects sales trends to pick up for the rest of the year for AutoZone.

During the quarter ended May 4, AutoZone opened 33 new stores, relocated three stores and closed one store in the U.S. The company also opened seven new stores in Mexico, bringing the North American store count to 4,767 stores.

AutoZone also has 341 stores in Mexico and one store in Brazil for a total store count of 5,109.