AutoZone Reports Strong Increase in Third Quarter

AutoZone, Inc. reports net sales of US$1.8 billion for its third quarter ended May 8, 2010, an increase of 9.9% from the third quarter of fiscal 2009.

In addition, domestic same store sales for the U.S. based auto parts chain, or sales for stores open at least one year, increased 7.1% for the quarter.

Net income for the quarter increased $29.1 million, or 16.7%, over the same period last year to $202.7 million, while diluted earnings per share increased 31.5% to $4.12 per share from $3.13 per share in the year-ago quarter.

For the quarter, gross profit, as a percentage of sales, was 50.7% (versus 50.2% for last year’s quarter). The improvement in gross margin benefited from higher merchandise margins and leveraging distribution costs due to higher sales. The merchandise margin improvement of 23 basis points was attributable to both a shift in mix to higher margin product and lower product acquisition costs.

Operating expenses, as a percentage of sales, were 31.1% (versus 31.8% last year).

The reduction in operating expenses, as a percentage of sales, reflected leverage of store operating expenses due to higher sales, partially offset by 17 basis points of expense from the continued investment in our hub store initiative and 16 basis points from higher pension expense.

Under its share repurchase program, AutoZone repurchased 1.5 million shares of its common stock for $266 million during the third quarter, at an average price of $172 per share. At quarter end, the Company had $251 million remaining under its current share repurchase authorization.

The Company’s inventory increased 2.1% over the same period last year, driven by new store openings. Inventory per store was $506 thousand versus $516 thousand last year. Net inventory, defined as merchandise inventories less accounts payable, decreased on a per store basis to $12 thousand from $33 thousand last year. 

“We are pleased to report our 15th consecutive quarter of double digit EPS growth. Our plan remains consistent, as we focus on improving parts coverage supported by our enhanced hub store model, hiring, retaining and training the best automotive parts professionals, and growing our Commercial business. Additionally, we reported a 26.5% trailing four-quarter return on invested capital ratio this past quarter, as we remained committed to our disciplined approach of growing operating earnings while utilizing our capital effectively,” said Bill Rhodes, chairman, president and chief executive officer.

During the quarter ended May 8, 2010, AutoZone opened 21 new stores, closed one store and replaced one store in the U.S. and opened 10 new stores in Mexico. As of May 8, 2010, the Company had 4,309 stores in 48 states, the District of Columbia and Puerto Rico in the U.S. and 212 stores in Mexico.

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