AutoZone Reports Mild Fiscal Fourth Quarter

By Andy Meek

Memphis-based auto parts retailer AutoZone Inc. continues to find itself in an environment that’s unusual for the company and one that it’s not accustomed to, with the company’s fiscal fourth quarter sales bearing that out.

Time was, each quarter for AutoZone was something of a blowout, with a chart of figures like its sales numbers generally always climbing up and to the right.

That’s no longer the case.

AutoZone’s engine for sales and profits was idling in the fourth quarter and fiscal year 2017, replacing double-digit growth figures that were the norm. (Daily News File/Andrew J. Breig)

The company has gone from beating analysts’ expectations to performing in-line with them.

Among the quarter’s results, net sales for the 16-week fiscal fourth quarter were up 3.3 percent, to $3.5 billion, compared to the fiscal fourth quarter of 2016. At stores open for at least one year, sales were up 1 percent for the quarter.

An analyst note Raymond James put out Tuesday, Sept. 19, about the results declared those numbers support a market-perform rating for AutoZone – again, another unusual place to be for the once high-flying stock.

“Our results for the fiscal fourth quarter were in line with our expectations and demonstrated steady improvement,” AutoZone president, chairman and CEO Bill Rhodes said in his first comment to analysts on an earnings call Tuesday morning to discuss the quarter’s results. “Overall, we were encouraged to see our same-store sales return to being positive.”

The current unusual environment for AutoZone was evident in other statistics:

• The company’s same-store sales – an important retail industry metric – averaged 1.9 percent over the last five years. This fiscal year, the company ended with 0.5 percent growth, essentially flat.

• Weather is something that gets talked about frequently on calls between AutoZone management and analysts, since seasonal patterns affect mileage put on cars, shopping trends and the like. In recent weeks, though, AutoZone has felt the effects of the hurricanes that have pounded the U.S. – the company had more than 600 stores closed at some point as a result of the storms, all of which were back open as of the middle of last week.

• The company over the last year has experienced what Rhodes described as “accelerated pressure” on wages – “significantly more than I have experienced in my nearly 23 years at AutoZone.”

It’s been something of a perfect storm for the company, the combination of these and other factors. The company made the decision to invest in its business at an accelerated rate in inventory, capital expenses and operating expenses at the same time that sales began to slow, analysts were told Tuesday.

Nevertheless, the company believes that as the country returns to more normal weather patterns, sales should pick up in 2018.

“Our management team has been in this business for a long time, and we’ve been through many different cycles,” Rhodes said. “Sometimes we’ve had tailwinds, and we’ve benefited from those. Other times we’ve had headwinds and we fought against it. Ultimately, we manage this business for the long term.”

In other news about the fourth quarter, AutoZone bought back 366,000 shares of its stock for $277 million. For the fiscal year, the company bought back 1.5 million shares for $1.07 billion, and at year-end, the company had $824 million remaining under its current share repurchase authorization.