VOL. 128 | NO. 187 | Wednesday, September 25, 2013
AutoZone Reports Mixed Quarterly Results
By Andy Meek
AutoZone Inc. arguably has shifted temporarily into the slow lane, but the Memphis-based auto parts retailer is confident its engine still has enough horsepower to outrace the competition.
AutoZone Inc. employees were in Memphis this week for the company’s annual sales meeting. The company reported a 15 percent growth in profit, but only a 1 percent growth in same-store sales in the fiscal fourth quarter.
(Daily News/Andrew J. Breig)
The company grew its revenue 12 percent during the quarter ended Aug. 31, reporting $3.1 billion in net sales. However, its domestic same-store sales – which are sales open at stores at least a year, an important retail metric that sets aside the effects of store openings and closings – fell short of expectations, partly challenged by warmer than expected winter weather resulting in less demand on vehicle parts.
Same-store sales were up only 1 percent in the company’s fiscal fourth quarter. However, the company said it’s expecting an increase in demand soon.
Morgan Stanley analyst David Gober said in a research note that AutoZone’s quarterly results “reflect a choppy environment” for the auto parts sector.
Raymond James analyst Dan Wewer pointed out in a commentary released after AutoZone’s earnings announcement Wednesday, Sept. 25, that the company’s results benefited from an additional selling week this year that it didn’t have during the same quarter last year – 17 weeks, versus 16 weeks last year.
“We characterize AutoZone’s results as mixed given they were driven by higher than anticipated share repurchases and expense leverage, but partially offset by weaker than planned gross margin and same-store sales,” Wewer noted.
AutoZone’s profit for the quarter grew almost 15 percent, up $47.5 million to $371.2 million. Earnings per share for the quarter was up 23.2 percent to $10.42, and AutoZone chairman, president and CEO Bill Rhodes happily touted the company’s achievement of its 28th straight quarter of double-digit earnings per share growth.
The profit of $10.42 beat the consensus analyst expectation of $10.34 per share. Wednesday morning, the Wall Street Journal also reported that over the past 10 years, AutoZone has delivered for investors more than five times the gain of the broader stock market.
“Our customer service and trustworthy advice are what differentiate us across our industry, and our AutoZoners' passion to deliver superior service has allowed us to consistently deliver exceptional financial results,” Rhodes said. “For the year, we reached many new milestones, which included surpassing $9 billion in total sales, opening 368 additional commercial programs, acquiring AutoAnything, and opening three stores in Brazil. We also improved our return on invested capital from the third quarter, achieving 32.7 percent at year-end. While our same-store sales performance was below our expectations for the quarter, we believe the initiatives we have in place will lead to improved sales in both retail and commercial in 2014.”
Rhodes said the company remains committed to delivering exceptional customer service while also growing its various businesses and that it will maintain a disciplined approach to growing operating earnings and putting capital to use.
Also during the fourth quarter, AutoZone bought back 1.3 million shares of its common stock for $560 million. At quarter’s end, the company had $468 million remaining under its current share repurchase authorization.
The company also opened 69 new stores in the U.S. during the quarter, as well as 21 new stores in Mexico and two in Brazil. As of Aug. 31, the company had 4,836 stores in the U.S., 362 stores in Mexico, and three stores in Brazil for a total store count of 5,201.