AutoZone Beats Earnings, Misses on Sales
AutoZone Inc. (AZO) reported a 16.2% rise in earnings per share to $6.29 for the first quarter of fiscal 2014 (ended Nov 23, 2013) from $5.41 in the year-ago quarter. Earnings surpassed the Zacks Consensus Estimate by 3 cents. Net income went up 7.2% to $218.1 million from $203.5 million in the year-ago quarter.
Revenues increased 5.1% year over year to $2,093.6 million. However, it missed the Zacks Consensus Estimate of $2,099 million. Domestic same-store sales (sales for stores open at least one year) inched up 0.9% in the quarter.
Gross profit increased 5.2% to $1.1 billion, or 51.9% of sales, from $1 billion, or 51.8% of sales, in the year-ago quarter. The year-over-year rise in margins due to reduction in acquisition costs was offset by the AutoAnything acquisition.
Operating profit rose 5.6% to $383.7 million from $363.3 million in the first quarter of fiscal 2013. Operating expenses increased 5% to $702 million, or 33.5% of sales, versus $668.6 million, or 33.6% of sales, a year ago. The marginal decline in operating expenses, as a percentage of sales, was due to a shift in the timing of advertising expenditure.
Store Opening and Inventory
AutoZone opened 7 stores in the U.S. during the quarter. It also opened one new store in Mexico and another in Brazil. As of Nov 23, 2013, the company had 4,843 stores in 49 states, the District of Columbia and Puerto Rico in the U.S, 363 stores in Mexico and 4 stores in Brazil.
AutoZone’s inventory grew 9.1% in the quarter, driven by increased product placement in stores and higher store count and continued strategic investments in hard parts assortment. Inventory per store increased 5.4% to $566,000 from $537,000 in the corresponding quarter last year.
Share Repurchase
During the quarter, AutoZone repurchased 678,000 shares for $292 million, reflecting an average price of $430 per share. The company had $177 million worth of shares remaining for repurchase at the end of the first quarter.
Financial Details
AutoZone had cash and cash equivalents of $125.9 million as of Nov 23, 2013, up from $99.9 million as of Nov 17, 2012. Total debt amounted to $4.17 billion as of Nov 23, 2013, compared with $3.8 billion as of Nov 17, 2012. The company had a stockholder deficit of $1.72 billion as of Nov 23, 2013, up from $1.59 billion as of Nov 17, 2012.
During first quarter of fiscal 2014, AutoZone generated net cash flow of $288.7 million before share repurchases and changes in debt compared with $279.7 million in the year ago quarter. Capital spending increased to $82.6 million from $80.4 million in the prior-year quarter.
AutoZone remains committed to its strategic initiatives and to growing its operating earnings and utilizing its capital effectively. The company opened about 100 new commercial programs in its Commercial business in the quarter. The company also rolled out new version of its electronic parts catalog, and grew sales across its digital commerce businesses. AutoZone continues to test other initiatives to enhance its inventory availability.
AutoZone is a prominent player in the automotive replacement parts and accessories industry in the U.S. Currently, it retains a Zacks Rank #3 (Hold).
Other companies in the same industry worth considering include CarMax Inc. (KMX), Pep Boys-Manny, Moe & Jack (PBY) and U.S. Auto Parts Network Inc. (PRTS). All of them hold a Zacks Rank #2 (Buy).
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