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


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  1.3x    1.3x