AutoZone Registers Solid First Quarter

U.S. auto parts chain AutoZone reports that its first quarter financial performance was up virtually across the board.
AutoZone, Inc. reported diluted earnings per share of $0.76 for its first quarter (12 weeks) ended November 17, 2001, a 65% increase from diluted earnings per share of $0.46 in the first quarter of fiscal 2001.
Sales for the quarter increased 11% to $1.18 billion from $1.06 billion reported for the year ago quarter. Same store sales, or sales for domestic auto parts stores open at least one year, increased 9% during the quarter. Operating profits were up 40% to $156 million from $111 million, with operating margins of 13.2%, compared to 10.4% last year.
In the quarter, AutoZone signed an agreement to sell TruckPro, its heavy- duty truck parts subsidiary, to an investment group. The transaction is subject to standard closing conditions and satisfactory due diligence by the buyer. AutoZone expects the sale to close in its second fiscal quarter.
AutoZone opened 15 new auto parts stores in the U.S., replaced 6 and, as previously announced, closed 35. In addition, one new auto parts store was opened in Mexico.
“We had a great quarter,” said Steve Odland, chairman, president, and chief executive officer. “Our sales and gross margins indicate that our marketing and merchandising initiatives are making an impact. We also showed good operating expense leverage as we executed our operating plan. Our business is strong and we continue to find new ways to serve our customers as we focus on increasing shareholder value.
“We are in a dynamic and growing industry, and that growth is accelerating with the increase in the population of cars and light trucks seven years and older, the vehicles our typical customers drive. Moreover, growth in our industry is not hurt by the economic slowdown. We believe the number of miles driven may actually increase with lower gas prices and as people choose driving over flying. As miles driven increase, vehicles need more maintenance.
“The addition of new merchandise, along with more effective advertising and marketing have increased AutoZone’s market share, and we believe, has helped expand the size of the industry. Our profit margins are improving as we implement our strategic plan. New merchandise, better product cost, strategic pricing, and relentless expense discipline have helped us restore and to begin to exceed our historically strong EBIT margins.
“Our cash flow and financial returns continue to improve. The strong, stable cash flow provided by our hard parts business, when combined with increased hurdle rates for new investments, should drive steady cash flow growth and improving return on invested capital. Finally, our share buyback program is a further boost to EPS. In the past three years, we have repurchased more than a third of our shares at bargain prices. Our reduced share base will continue to contribute significantly to shareholder value in the future.”
Aggregate share repurchases under the currently authorized share repurchase program at the end of the quarter were $1.48 billion or 53.2 million shares at an average price of $28 per share, including $170 million or 3.8 million shares at an average price of $44 per share under forward purchase contracts.