AutoZone 2nd Quarter Same Store Sales Increase 2.6%; EPS Increases 10.7% to $11.49

Globe Newswire 26-Feb-2019 6:59 AM

MEMPHIS, Tenn., Feb. 26, 2019 (GLOBE NEWSWIRE) -- AutoZone, Inc. (NYSE:AZO) today reported net sales of $2.5 billion for its second quarter (12 weeks) ended February 9, 2019, an increase of 1.6% from the second quarter of fiscal 2018 (12 weeks).  Domestic same store sales, or sales for stores open at least one year, increased 2.6% for the quarter.

Net income for the quarter increased 1.8% over the same period last year to $294.6 million, while diluted earnings per share increased 10.7% to $11.49 per share from $10.38 per share in the year-ago quarter.  Net income and diluted earnings per share benefited from Tax Reform in both years from a lower effective tax rate, and last year also benefited from the revaluation of deferred taxes, which were offset by last year's after-tax impact from impairment charges related to the sale of two businesses.   

For the quarter, gross profit, as a percentage of sales, was 54.1% (versus 52.9% for the same period last year).  The increase in gross margin was attributable to the impact of the sale of two businesses completed in the prior year (71 bps) and higher merchandise margins.  Operating expenses, as a percentage of sales, were 37.7% (versus 44.4% the same period last year).  Leverage was primarily driven by the impairment related to the sale of two businesses in the prior year (800 bps), partially offset by increased domestic store payroll (89 bps) and technology-related investments (23 bps).

Under its share repurchase program, AutoZone repurchased 422 thousand shares of its common stock for $350.0 million during the second quarter, at an average price of $830 per share.  At the end of the second quarter, the Company had $635 million remaining under its current share repurchase authorization. 

The Company's inventory increased 5.4% over the same period last year, driven by new stores and increased product placement, partially offset by the sale of two businesses completed in the prior year.  Inventory per location was $690 thousand versus $671 thousand last year and $658 thousand last quarter.  Net inventory, defined as merchandise inventories less accounts payable, on a per location basis, was a negative $58 thousand versus negative $46 thousand last year and negative $59 thousand last quarter.

"I want to thank and congratulate all AutoZoners across the company for their tremendous efforts during our second fiscal quarter.  Their continued hard work and dedication to providing superior service again resulted in strong quarterly results.  Every year, our second quarter's financial results are challenging as it is our seasonally lowest sales quarter and weather impacts can drive significant variability in sales.  Today, we are pleased to report solid performance in DIY while our Commercial business growth rate accelerated for the fourth consecutive quarter.  Our industry fundamentals remain strong, and we continue to be excited about the initiatives we have underway to further enhance our inventory availability, to continue to accelerate Commercial and to meet our customers how, when and where they want to be met with our omni-channel efforts.  As we continue to invest in our business, we remain committed to our disciplined approach of increasing operating earnings and cash flow, and utilizing our balance sheet and capital effectively," said Bill Rhodes, Chairman, President and Chief Executive Officer. 

During the quarter ended February 9, 2019, AutoZone opened 20 new stores in the U.S., one store in Mexico and two stores in Brazil.  As of February 9, 2019, the Company had 5,651 stores in 50 states in the U.S., the District of Columbia and Puerto Rico, 568 stores in Mexico, and 22 stores in Brazil for a total count of 6,241.

AutoZone is the leading retailer and a leading distributor of automotive replacement parts and accessories in the United States. Each AutoZone store carries an extensive product line for cars, sport utility vehicles, vans and light trucks, including new and remanufactured automotive hard parts, maintenance items, accessories, and non-automotive products.  Many stores also have a commercial sales program that provides commercial credit and prompt delivery of parts and other products to local, regional and national repair garages, dealers, service stations, and public sector accounts.  AutoZone also sells the ALLDATA brand diagnostic and repair software through www.alldata.com. Additionally, we sell automotive hard parts, maintenance items, accessories, and non-automotive products through www.autozone.com and our commercial customers can make purchases through www.autozonepro.com.  AutoZone does not derive revenue from automotive repair or installation.

AutoZone will host a conference call this morning, Tuesday, February 26, 2019, beginning at 10:00 a.m. (EST) to discuss its second quarter results.  Investors may listen to the conference call live and review supporting slides on the AutoZone corporate website, www.autozoneinc.com by clicking "Investor Relations," "Conference Calls."  The call will also be available by dialing (210) 839-8923.  A replay of the call and slides will be available on AutoZone's website.  In addition, a replay of the call will be available by dialing (203) 369-3527 through Wednesday, March 27, 2019, at 11:59 p.m. (EDT).

This release includes certain financial information not derived in accordance with generally accepted accounting principles ("GAAP").  These non-GAAP measures include adjustments to reflect return on invested capital, adjusted debt, adjusted debt to EBITDAR and cash flow before share repurchases.   The Company believes that the presentation of these non-GAAP measures provides information that is useful to investors as it indicates more clearly the Company's comparative year-to-year operating results, but this information should not be considered a substitute for any measures derived in accordance with GAAP.  Management targets the Company's capital structure in order to maintain its investment grade credit ratings and manages cash flows available for share repurchase by monitoring cash flows before share repurchases, as shown on the attached tables.  The Company believes this is important information for the management of its debt levels and share repurchases.  We have included a reconciliation of this additional information to the most comparable GAAP measures in the accompanying reconciliation tables.

Certain statements contained in this press release constitute forward-looking statements that are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements typically use words such as "believe," "anticipate," "should," "intend," "plan," "will," "expect," "estimate," "project," "positioned," "strategy," "seek," "may," "could" and similar expressions. These are based on assumptions and assessments made by our management in light of experience and perception of historical trends, current conditions, expected future developments and other factors that we believe to be appropriate. These forward-looking statements are subject to a number of risks and uncertainties, including without limitation: product demand; energy prices; weather; competition; credit market conditions; access to available and feasible financing; the impact of recessionary conditions; consumer debt levels; changes in laws or regulations; war and the prospect of war, including terrorist activity; inflation; the ability to hire and retain qualified employees; construction delays; the compromising of confidentiality, availability or integrity of information, including cyber attacks; and raw material costs of suppliers. Certain of these risks are discussed in more detail in the "Risk Factors" section contained in Item 1A under Part 1 of the Annual Report on Form 10-K for the year ended August 25, 2018, and these Risk Factors should be read carefully. Forward-looking statements are not guarantees of future performance and actual results, developments and business decisions may differ from those contemplated by such forward-looking statements, and events described above and in the "Risk Factors" could materially and adversely affect our business. Forward-looking statements speak only as of the date made. Except as required by applicable law, we undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise. Actual results may materially differ from anticipated results.

Contact Information:
Financial: Brian Campbell at (901) 495-7005, brian.campbell@autozone.com
Media: Jennifer Hughes at (866) 966-3017, jennifer.hughes@autozone.com