AutoZone Reports Sales and Earnings Up

U.S. auto parts chain AutoZone, Inc. has reported that total sales and same store sales figures are up 5.2% and 2.8% respectively for the quarter ended May 10.
The company reported sales of $1.288 billion U.S. for its third fiscal quarter (12 weeks) ended May 10, 2003, an increase of 5.2% from fiscal 2002. Same store sales, or sales for domestic stores open at least one year, increased 2.8% during the quarter, including flat retail comparable sales and 30% for commercial comparable sales.
Gross profit, as a percentage of sales, for the quarter improved by 223 basis points, while operating expenses, as a percentage of sales, declined by 10 basis points. This resulted in a 17.2% operating margin, up 233 basis points from last year. Net income for the quarter increased by 23% to $126.0 million, and diluted earnings per share increased 36% to $1.30 from $0.96 reported in the year-ago quarter. All figures in U.S. dollars.
Return on invested capital for the trailing four quarters increased to 22.3%. For the fiscal year-to-date period (36 weeks), sales were $3.628 billion, an increase of 4.2% from the previous year, with a same store sales increase of 3.2%. Year-to-date net income increased 24% to $310.2 million, and diluted earnings per share for the period increased 36% to $3.12 from $2.29.
On a trailing four quarters basis, AutoZone achieved a 4.3% same store sales increase, including 2.0% for retail and 25.5% for commercial.
Additionally, inventory levels per store declined from the second quarter level of $471 thousand to $469 thousand. Even with these reductions, the company’s payables to inventory ratio rose from 70% last quarter to 73% this quarter. Net inventory (inventory net of accounts payable) per store declined from the second quarter level of $140 thousand to $128 thousand.
“We are pleased with our strong performance throughout the third quarter, even as we anniversaried 9.5% same store sales increases from the prior year,” said Steve Odland, chairman, president, and chief executive officer. “The 30% same store sales increase in our AZ Commercial business continues to reflect our commercial customers’ positive response to our efforts. This is the third straight quarter of roughly 30% AZ Commercial comparable sales increases. Not only have we continued to add valued local commercial customers, we have added valued chain accounts. Additionally, our ongoing focus on gross margin improvement and relentless expense discipline continues to drive shareholder value. The combined impact of these efforts improved operating margin by 233 basis points over last year.”
Under its ongoing share repurchase program, AutoZone repurchased 4.2 million shares of its common stock for $285 million during the third quarter, including $119 million purchased under forward purchase contracts. Since 1998, cumulative share repurchases have been $2.676 billion, or 70.2 million shares at an average price of $38.09 per share, including $295.4 million, or 4.0 million shares, under forward purchase contracts yet to be settled. Subsequent to the end of the quarter, the company purchased these 4.0 million shares in settlement of all remaining forward contracts outstanding as of May 10, 2003, at an average cost of $74.54 per share.
Also, the board of directors elected James Postl as a new outside director. Postl is the retired president and chief executive officer of Pennzoil-Quaker State Company. Prior to that he served in various senior management positions at Nabisco Inc., Pepsico Inc. and Procter & Gamble.