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CST: 23/08/2019 08:32:15   

AutoZone 3rd Quarter Same Store Sales Increase 3.9%; EPS Increases 19.2% to $15.99

94 Days ago

MEMPHIS, Tenn., May 21, 2019 (GLOBE NEWSWIRE) -- AutoZone, Inc. (NYSE: AZO) today reported net sales of $2.8 billion for its third quarter (12 weeks) ended May 4, 2019, an increase of 4.6% from the third quarter of fiscal 2018 (12 weeks).  Domestic same store sales, or sales for stores open at least one year, increased 3.9% for the quarter.

Net income for the quarter increased 10.7% over the same period last year to $405.9 million, while diluted earnings per share increased 19.2% to $15.99 per share from $13.42 per share in the year-ago quarter.  Net income and earnings per share benefited from a lower effective income tax rate.

For the quarter, gross profit, as a percentage of sales, was 53.6% (versus 53.5% 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 (29 bps), partially offset by lower merchandise margins driven primarily by a shift in mix.  Operating expenses, as a percentage of sales, were 33.9% (versus 33.0% the same period last year), with deleverage primarily due to increased domestic store payroll (69 bps).

Under its share repurchase program, AutoZone repurchased 472 thousand shares of its common stock for $466.0 million during the third quarter, at an average price of $987 per share.  At the end of the third quarter, the Company had $1.169 billion remaining under its current share repurchase authorization. 

The Company’s inventory increased 8.0% over the same period last year, driven by new stores and increased product placement.  Inventory per location was $688 thousand versus $658 thousand last year and $690 thousand last quarter.  Net inventory, defined as merchandise inventories less accounts payable, on a per location basis, was a negative $58 thousand versus negative $48 thousand last year and negative $58 thousand last quarter.

“I want to thank and congratulate all AutoZoners for their efforts in delivering solid results for our third fiscal quarter. Their commitment to providing superior service again resulted in strong quarterly sales results with solid performance in DIY while our Commercial business growth rate accelerated again. Our industry fundamentals remain strong and the industry data available to us shows we are improving our market share position.  And, we continue to be excited about the initiatives we have underway to further enhance our inventory availability, to continue to accelerate our Commercial business 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 May 4, 2019, AutoZone opened 35 new stores in the U.S., eight stores in Mexico and three stores in Brazil.  As of May 4, 2019, the Company had 5,686 stores in 50 states in the U.S., the District of Columbia and Puerto Rico, 576 stores in Mexico, and 25 stores in Brazil for a total count of 6,287.

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, May 21, 2019, beginning at 10:00 a.m. (EDT) to discuss its third 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) 369-1211 through Thursday, June 20, 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: David McKinney at (901) 495-7951, david.mckinney@autozone.com

AutoZone's 3rd Quarter Highlights - Fiscal 2019    
               
Condensed Consolidated Statements of Operations          
3rd Quarter, FY2019            
(in thousands, except per share data)            
      GAAP Results    
      12 Weeks Ended   12 Weeks Ended    
      May 4, 2019   May 5, 2018    
               
Net sales   $   2,783,006     $   2,660,152      
Cost of sales     1,290,986       1,237,178      
Gross profit       1,492,020         1,422,974      
Operating, SG&A expenses     944,497       877,209      
Operating profit  (EBIT)       547,523         545,765      
Interest expense, net     43,239       41,958      
Income before taxes       504,284         503,807      
Income taxes(1)     98,335       137,086      
Net income   $   405,949     $   366,721      
Net income per share:             
  Basic   $   16.35     $   13.62      
  Diluted   $   15.99     $   13.42      
Weighted average shares outstanding:            
  Basic     24,836       26,926      
  Diluted     25,394       27,329      
               
(1) The Company's effective tax rate was 19.5% for the twelve weeks ended May 4, 2019 and 27.2% for the comparable prior year period.  Third quarter fiscal 2019 and 2018 include $13.1M and $0.4M in tax benefits from stock option exercises, respectively. 
     
               
Year-To-Date 3rd Quarter, FY2019            
(in thousands, except per share data)   GAAP Results    
      36 Weeks Ended   36 Weeks Ended    
      May 4, 2019   May 5, 2018    
               
Net sales   $   7,875,307     $   7,662,309      
Cost of sales     3,640,706       3,596,442      
Gross profit       4,234,601         4,065,867      
Operating, SG&A expenses     2,799,239       2,846,250      
Operating profit  (EBIT)       1,435,362         1,219,617      
Interest expense, net     123,608       120,186      
Income before taxes       1,311,754         1,099,431      
Income taxes(2)     259,762       162,177      
Net income   $   1,051,992     $   937,254      
Net income per share:             
  Basic   $   41.73     $   34.32      
  Diluted   $   40.92     $   33.75      
Weighted average shares outstanding:            
  Basic     25,210       27,306      
  Diluted     25,711       27,769      
               
(2) The Company's effective tax rate was 19.8% for the thirty-six weeks ended May 4, 2019 and 14.8% for the comparable prior year period. Fiscal 2019 and 2018 include $38.2M and $27.2M in tax benefits from stock option exercises, respectively.  Additionally, prior year-to-date results were negatively impacted by asset impairments of $193.2M (pre-tax) recognized in the second quarter of fiscal 2018 related to the sale of two businesses completed in the prior year, and benefited from Tax Reform (effective January 1, 2018) 
 
               
Selected Balance Sheet Information            
(in thousands)            
      May 4, 2019   May 5, 2018   August 25, 2018
Cash and cash equivalents   $   174,058     $   218,386     $   217,824  
Merchandise inventories     4,325,659       4,005,820         3,943,670  
Current assets     4,971,340       4,671,277         4,635,869  
Property and equipment, net     4,324,930       4,122,966         4,218,400  
Total assets     9,773,740       9,301,769         9,346,980  
Accounts payable     4,693,094       4,296,677         4,409,372  
Current liabilities      5,316,889       4,918,336         5,028,681  
Total debt       5,151,917       4,954,697         5,005,930  
Stockholders' deficit     (1,589,513 )     (1,361,603 )       (1,520,355 )
Working capital       (345,549 )       (247,059 )       (392,812 )
               

 

Condensed Consolidated Statements of Operations    
                       
Adjusted Debt / EBITDAR (Trailing 4 Qtrs)  
(in thousands, except adjusted debt to EBITDAR ratio)  
   
      May 4, 2019   May 5, 2018            
Net income $ 1,452,274     $ 1,371,154              
Add:   Impairment   -       193,162              
    Pension settlement   130,263       -              
    Interest   177,949       171,586              
    Taxes   396,378       384,504              
Adjusted EBIT   2,156,864       2,120,406              
                       
Add:   Depreciation and amortization   359,111       340,154              
    Rent expense   320,840       314,525              
    Share-based expense   45,644       38,460              
EBITDAR $ 2,882,459     $ 2,813,545              
                       
Debt $ 5,151,917     $ 4,954,697              
Capital lease obligations   165,541       160,452              
Add: rent x 6   1,925,040       1,887,150              
Adjusted debt $ 7,242,498     $ 7,002,299              
                       
Adjusted debt to EBITDAR   2.5       2.5              
           
                       
Selected Cash Flow Information
(in thousands)                  
      12 Weeks Ended   12 Weeks Ended     36 Weeks Ended   36 Weeks Ended  
      May 4, 2019   May 5, 2018     May 4, 2019   May 5, 2018  
                       
Depreciation and amortization $ 84,888     $ 79,754       $ 251,118     $ 237,091    
Capital spending   118,015       112,401         313,847       327,148    
                       
Cash flow before share repurchases:                  
Decrease in cash and cash equivalents $ (21,607 )   $ (70,136 )     $ (43,766 )   $ (74,884 )  
Less increase/(decrease) in debt   48,000       (90,000 )       151,500       (129,600 )  
Add back share repurchases   466,019       399,701         1,313,116       927,155    
Cash flow before share repurchases and changes in debt $ 396,412     $ 419,565       $ 1,117,850     $ 981,871    
                       
                       
Other Selected Financial Information  
(in thousands, except ROIC)                  
      May 4, 2019   May 5, 2018            
                       
                       
Cumulative share repurchases ($ since fiscal 1998) $ 20,731,427     $ 18,753,453              
Remaining share repurchase authorization ($)   1,168,573       896,547              
                       
Cumulative share repurchases (shares since fiscal 1998)   146,236       143,714              
                       
Shares outstanding, end of quarter   24,611       26,662              
                       
      Trailing 4 Quarters            
      May 4, 2019   May 5, 2018            
Net income $ 1,452,274     $ 1,371,154              
Adjustments:                  
    Impairment   -       193,162              
    Pension settlement   130,263       -              
    Interest expense   177,949       171,586              
    Rent expense   320,840       314,525              
    Tax effect*   (144,107 )     (184,103 )            
    Deferred tax liabilities, net   (1,774 )     (136,679 )            
After-tax return $ 1,935,445     $ 1,729,645              
                       
Average debt**   5,075,956       5,043,061              
Average stockholders' deficit**   (1,544,890 )     (1,471,968 )            
Add: Rent x 6**   1,925,040       1,887,150              
Average capital lease obligations**   158,701       155,729              
Pre-tax invested capital $ 5,614,807     $ 5,613,972              
                       
Return on Invested Capital (ROIC)     34.5 %     30.8 %            
                                       
*   Effective tax rate over trailing four quarters ended May 4, 2019 is 28.1% for pension settlement and 21.6% for interest and rent expense.  Effective tax rate over trailing four quarters ended May 5, 2018, excluding the impact of the revaluation of net deferred tax liabilities, is 28.3% and 24.2% for impairment
                                       
**   All averages are computed based on trailing 5 quarter balances.
                                       

 

AutoZone's 3rd Quarter Highlights - Fiscal 2019                              
Selected Operating Highlights                                  
Condensed Consolidated Statements of Operations                                  
                                     
Store Count & Square Footage                                  
                                     
      12 Weeks Ended         12 Weeks Ended       36 Weeks Ended       36 Weeks Ended    
      May 4, 2019         May 5, 2018       May 4, 2019       May 5, 2018    
AutoZone Domestic stores (Domestic):                                  
  Store count:                                  
  Beginning domestic stores     5,651           5,514         5,618         5,465    
  Stores opened     35           26         68         77    
  Stores closed     -           -         -         2    
  Ending domestic stores     5,686           5,540         5,686         5,540    
                                     
  Relocated stores     1           2         2         3    
                                     
  Stores with commercial programs     4,831           4,683         4,831         4,683    
                                     
  Square footage (in thousands)     37,203           36,216         37,203         36,216    
                                     
AutoZone Mexico stores:                                  
  Stores opened     8           4         12         12    
  Total stores in Mexico     576           536         576         536    
                                     
AutoZone Brazil stores:                                  
  Stores opened     3           -         5         2    
  Total stores in Brazil     25           16         25         16    
                                     
Total AutoZone stores     6,287           6,092         6,287         6,092    
                                     
  Square footage (in thousands)     41,653           40,294         41,653         40,294    
  Square footage per store     6,625           6,614         6,625         6,614    
                                     
                                     
Sales Statistics                                  
($ in thousands, except sales per average square foot)                                  
      12 Weeks Ended         12 Weeks Ended       Trailing 4 Quarters       Trailing 4 Quarters    
Total AutoZone Stores (Domestic, Mexico and Brazil)   May 4, 2019         May 5, 2018       May 4, 2019       May 5, 2018    
  Sales per average store   $ 436         $ 425       $ 1,814       $ 1,785    
  Sales per average square foot   $ 66         $ 64       $ 274       $ 270    
                                     
Total Auto Parts (Domestic, Mexico, Brazil and IMC)                                    
  Total auto parts sales   $ 2,731,900         $ 2,610,485   (1)   $ 11,227,486       $ 10,849,645    (1)
  % Increase vs. LY     4.7%           3.2%         3.5%         4.2%    
                                     
Domestic Commercial                                    
  Total domestic commercial sales   $ 614,808         $ 535,187       $ 2,408,148       $ 2,154,853    
  % Increase vs. LY     14.9%           7.3%         11.8%         6.4%    
                                     
All Other (ALLDATA and AutoAnything)                                  
  All other sales   $ 51,106         $ 49,667   (2)   $ 206,590       $ 325,268    (2)
  % Increase vs. LY     2.9%           (43.8% )       (36.5% )       (11.2% )  
                                     
(1) Results include IMC, which was sold during the third quarter of fiscal 2018 (effective April 4, 2018).      
(2) Results include AutoAnything, which was sold during the third quarter of fiscal 2018 (effective February 26, 2018).    
                                     
      12 Weeks Ended         12 Weeks Ended       36 Weeks Ended       36 Weeks Ended    
      May 4, 2019         May 5, 2018       May 4, 2019       May 5, 2018    
Domestic same store sales       3.9%           0.6%         3.1%         1.7%    
                                     
Inventory Statistics (Total Locations)                                  
      as of         as of                    
      May 4, 2019         May 5, 2018                    
  Accounts payable/inventory     108.5%           107.3%                    
                                     
  ($ in thousands)                                  
  Inventory   $ 4,325,659         $ 4,005,820                    
  Inventory per location     688           658                    
  Net inventory (net of payables)     (367,435 )         (290,857 )                  
  Net inventory  / per location     (58 )         (48 )                  
                                     
      Trailing 5 Quarters                    
      May 4, 2019         May 5, 2018                    
  Inventory turns     1.3 x         1.3 x                  
                                     

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