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AZO · AUTOZONE INC

34 filings

10-K

AZO 10-K Annual Reports

AUTOZONE INC - 34 annual reports

Filing record · 2016–202610-K1010-Q328-K127

2025
AUTOZONE INC Annual Report, Year Ended Aug 30, 2025
AutoZone (AZO) closed fiscal 2025 (52 weeks ended August 30, 2025) with net sales of $18.9 billion, up 2.4% from $18.5 billion in fiscal 2024, which included a 53rd week. Domestic same-store sales rose 3.2% and domestic commercial sales grew 6.7%, but profitability declined: operating profit fell 4.7% to $3.6 billion, net income dropped 6.2% to $2.5 billion, and diluted EPS decreased 3.1% to $144.87. Gross margin contracted 47 basis points to 52.6% largely due to a $64.0 million non-cash LIFO charge (versus a $40.0 million benefit a year earlier), and SG&A rose to 33.6% of sales from 32.6% as the company invested in growth initiatives. International same-store sales were negative in reported dollars (-3.2%), though up 9.3% in constant currency. The company continues to expand aggressively, opening a net 304 stores to reach 7,657 locations across the U.S., Mexico and Brazil, and capital expenditures rose to $1.3 billion. Management expects a moderate increase in investment in fiscal 2026. Share repurchases were reduced to $1.5 billion from $3.2 billion in the prior year, and the Board added $1.5 billion to the buyback authorization in October 2025, bringing total capacity to roughly $1.9 billion remaining. Total debt was $8.8 billion, the company maintains investment-grade ratings, and its stockholders' deficit narrowed to $3.4 billion, a structural feature of its aggressive buyback history rather than a sign of distress. Key risks flagged in the filing include tariff-driven product cost inflation, which is already affecting LIFO and pricing; dependence on an aging vehicle fleet and miles driven for demand; intensifying competition from online and omnichannel retailers; labor cost pressure and potential unionization; cybersecurity exposure, including past data exfiltration incidents; and self-insurance reserve estimates, which the auditor identified as a critical audit matter.
Oct 27, 2025
2024
AUTOZONE INC Annual Report, Year Ended Aug 31, 2024
AutoZone, Inc. reported robust performance for the fiscal year ended August 31, 2024, with net sales reaching $18.5 billion, an increase of 5.9% over the prior year. This growth was driven by a combination of new store openings, an additional 53rd week in the fiscal year, and a modest 1.4% increase in comparable store sales on a constant currency basis. The company demonstrated strong operational leverage, with operating profit increasing by 9.1% to $3.8 billion and net income rising by 5.3% to $2.7 billion. Shareholders can take comfort in AutoZone's continued commitment to capital return, as evidenced by significant share repurchases totaling $3.2 billion during the fiscal year, alongside a substantial remaining authorization. The company's strategic focus on expanding its commercial sales program and improving parts availability, coupled with its strong customer service ethos, positions it well for continued growth in the automotive aftermarket. Despite facing macroeconomic headwinds such as inflation and rising interest rates, AutoZone's performance indicates resilience and effective management of its business.
Oct 28, 2024
2023
AUTOZONE INC Annual Report, Year Ended Aug 26, 2023
AutoZone Inc. reported record net income of $2.5 billion for fiscal year 2023, a 4.1% increase over the prior year, with sales growing by 7.4% to $17.5 billion. This growth was driven by strong performance in both domestic and international markets, with domestic same-store sales increasing by 3.4% and international comparable store sales seeing a significant rise of 29.3% (17.5% in constant currency). The company continues to expand its store footprint, opening 197 net new stores, bringing the total to 7,140 locations across the Americas. Key financial highlights include a substantial increase in diluted earnings per share to $132.36, up from $117.19 in the prior year, partly due to effective share repurchase programs. The company also maintained a strong after-tax return on invested capital (ROIC) of 55.4%. AutoZone's commercial sales program showed robust growth, increasing by 8.7% year-over-year. Despite some gross margin pressure due to a non-cash LIFO charge and increased operating expenses as a percentage of sales, the company's overall financial health remains strong, supported by significant operating cash flow and a revolving credit facility. The company is focused on strategic investments in its supply chain, including hub and mega hub expansions, and new store development to support future growth. AutoZone's management remains optimistic about its ability to navigate economic factors and capitalize on opportunities in the automotive aftermarket.
Oct 24, 2023
2022
AUTOZONE INC Annual Report, Year Ended Aug 27, 2022
AutoZone, Inc. reported a strong fiscal year 2022, with record net income of $2.4 billion, an increase of 11.9% over the prior year, and sales growth of 11.1% to $16.3 billion. This performance was driven by robust domestic commercial sales growth of 26.5%, which now represent a significant 28.8% of domestic auto parts sales. The company continues to expand its store footprint, adding 176 net new locations in fiscal 2022, bringing the total to 6,943 stores across the Americas. Despite macroeconomic headwinds such as inflation and rising fuel costs, AutoZone demonstrated resilience. The company's strategic focus on improving customer service and expanding its commercial business initiatives contributed to both retail and commercial sales growth. The aging vehicle population, with an average age of 12.2 years, bodes well for continued demand for AutoZone's maintenance and repair parts. The company also continued its aggressive share repurchase program, demonstrating a commitment to returning capital to shareholders.
Oct 24, 2022
2021
AUTOZONE INC Annual Report, Year Ended Aug 28, 2021
AutoZone Inc. reported a strong fiscal year 2021, with net sales increasing by 15.8% to $14.63 billion and net income rising by 25.2% to $2.17 billion. This growth was driven by a 13.6% increase in domestic same-store sales and significant growth in the commercial sales segment, which was up 22.6%. The company benefited from sustained high customer demand, partly attributed to government stimulus measures. Despite increased expenses related to pandemic safety protocols and wage pressures, AutoZone demonstrated robust operational efficiency, reflected in a lower operating expense ratio as a percentage of sales. The company continued its strategic expansion, opening 218 net new stores and investing in its supply chain and hub store network. AutoZone also actively returned capital to shareholders through a substantial share repurchase program, repurchasing $3.38 billion in fiscal year 2021. Looking ahead, AutoZone remains focused on driving commercial growth, improving store operations, and leveraging its strong financial position to continue delivering value to its shareholders.
Oct 25, 2021
2020
AUTOZONE INC Annual Report, Year Ended Aug 29, 2020
AutoZone Inc. reported strong financial performance for the fiscal year ended August 29, 2020, with record net income of $1.733 billion, a 7.2% increase year-over-year. Net sales grew by 6.5% to $12.632 billion, driven by a robust 7.4% increase in domestic same-store sales and expansion in its commercial business. The company navigated the challenges of the COVID-19 pandemic, which initially impacted sales but were followed by record levels. AutoZone responded by temporarily suspending share repurchases to conserve liquidity, while also investing in employee benefits and safety measures related to the pandemic. The company's strategic initiatives to improve customer service and accelerate commercial growth continue to show positive results, supported by an aging vehicle population that typically requires more maintenance and repairs.
Oct 26, 2020
2019
AUTOZONE INC Annual Report, Year Ended Aug 31, 2019
AutoZone (AZO) closed fiscal 2019 (53 weeks ended August 31, 2019) with record net income of $1.617 billion, up 20.9% year over year, and diluted EPS of $63.43, up 30.1%. Net sales grew 5.7% to $11.864 billion, driven by 209 net new stores, a 3.0% domestic same-store sales increase, and the extra 53rd week. Gross margin expanded 41 basis points to 53.7%, and operating SG&A fell to 35.0% of sales from 37.1%, largely because fiscal 2018 carried $193.2 million of impairment charges and $130.3 million of pension termination charges. Commercial sales, a key growth lever, rose 15.7%. Cash generation was strong, with operating cash flow of $2.129 billion. The company returned $2.005 billion through share repurchases, funded mainly from operations, and still ended with $1.030 billion of commercial paper outstanding and a stockholders' deficit of $1.714 billion. Management frames this deficit as a deliberate result of aggressive buybacks, not weakness. Return on invested capital rose to 35.7% from 32.1%, and the adjusted debt-to-EBITDAR ratio held at 2.5x against an investment-grade target. The board added $1.25 billion to the buyback authorization in October 2019, leaving about $1.44 billion available. Key risks include sensitivity to fuel prices, wage inflation, competition from online and multi-channel retailers, and cyber-security exposure. Management expects higher investment in fiscal 2020, and a new lease accounting standard (ASU 2016-02) will add an estimated $2.5 to $2.8 billion of right-of-use assets and lease liabilities on adoption. Investors should weigh the strong earnings and return metrics against the rising leverage and the fact that the fiscal 2019 earnings benefited from an extra week.
Oct 28, 2019
2018
AUTOZONE INC Annual Report, Year Ended Aug 25, 2018
AutoZone (AZO) closed fiscal 2018 (year ended August 25, 2018) with record net income of $1.338 billion, up 4.4%, and net sales of $11.221 billion, up 3.1%. Domestic same-store sales rose 1.8%, and both retail and commercial sales grew. Diluted EPS rose 10.7% to $48.77, helped by a lower effective tax rate of 18.3% (versus 33.5% in fiscal 2017) from the Tax Cuts and Jobs Act and share repurchases. Reported operating profit fell 13% to $1.811 billion because of $193.2 million in asset impairments (IMC and AutoAnything) and $130.3 million in pension termination charges. Excluding those items, the business was healthier than the headline operating profit suggests. Gross margin expanded 53 basis points to 53.2%. Cash generation was strong. Operating cash flow rose to $2.08 billion from $1.57 billion, driven largely by a $320 million increase in accounts payable and accrued expenses. Cash flow before share repurchases and changes in debt was $1.60 billion, and the company bought back $1.59 billion of stock (2.4 million shares). Remaining authorization stood at $1.22 billion after a $1.25 billion increase announced September 26, 2018. Stockholders' deficit widened to $1.52 billion, reflecting the company's leveraged recapitalization-style buybacks, which AutoZone pursues while keeping its investment-grade rating (adjusted debt/EBITDAR of 2.5x). Growth is driven by store expansion and commercial programs. AutoZone ended the year with 6,202 stores, including 201 new openings, and 4,741 domestic stores offering commercial programs. Management flagged risks including the aging vehicle fleet (average age 11.7 years), rising wage pressure, competition from online retailers, and dependence on vendor-extended payment terms. The 111.8% accounts payable-to-inventory ratio is a key structural feature of the model.
Oct 24, 2018
2017
AUTOZONE INC Annual Report, Year Ended Aug 26, 2017
AutoZone (AZO) closed fiscal 2017 (year ended August 26, 2017) with record net income of $1.281 billion, up 3.2% year over year, on net sales of $10.889 billion, up 2.4%. Diluted EPS rose 8.3% to $44.07, but excluding a $0.81 benefit from the new share-based payment accounting standard (ASU 2016-09), adjusted diluted EPS grew 6.3% to $43.26. Growth was driven mainly by 215 new locations and a 0.5% domestic same-store sales increase, while gross margin was essentially flat at 52.7% and operating expense deleveraged to 33.6% of sales on higher wages and occupancy costs. The balance sheet remains structurally levered by design. Total debt rose to $5.08 billion, and stockholders' deficit narrowed to $(1.43) billion. AutoZone continued aggressive capital returns, repurchasing $1.07 billion of stock (1.5 million shares) and retaining $823.7 million of authorization. Operating cash flow was $1.571 billion, down from $1.641 billion, mainly due to the timing of accounts payable payments. Capital expenditures rose to $554 million as the company built new distribution centers, and management expects a lower investment rate in fiscal 2018. Key risks flagged include softening same-store sales (only 0.5% in fiscal 2017 versus 2.4% in fiscal 2016), rising wage pressure, an ROIC decline to 29.9% from 31.3% as recent investments dilute returns, and competition from online retailers. Management also notes an expected future adoption of ASC 842 leases that is likely to materially increase reported assets and liabilities. The company disclosed hurricane-related storm damage in Texas, Florida, Louisiana and Puerto Rico after year-end, with the Puerto Rico impact still under assessment.
Oct 25, 2017
2016
AUTOZONE INC Annual Report, Year Ended Aug 27, 2016
AutoZone's fiscal 2016 (year ended August 27, 2016) was a strong year, with record net income of $1.241 billion, up 7.0% from $1.160 billion, and net sales of $10.636 billion, up 4.4% from $10.187 billion. Diluted EPS rose 13.0% to $40.70, helped by aggressive share repurchases of $1.452 billion (about 1.9 million shares), which contributed roughly $1.17 of the EPS increase. Domestic same-store sales grew 2.4%, and the company added 205 net new locations, ending the year at 5,814 total locations across the U.S., Mexico, Brazil and IMC branches. Gross margin improved modestly to 52.7% of sales from 52.3%, driven by lower acquisition costs, partially offset by higher supply chain costs tied to inventory initiatives. Operating, selling, general and administrative expenses rose to 33.4% of sales from 33.1%, mainly due to higher store payroll. Operating cash flow reached $1.577 billion, and the company funded its growth and buybacks with a mix of internally generated cash and incremental debt, with total debt rising to $4.92 billion. Stockholders' deficit widened to $1.79 billion, a structural feature of AutoZone's leveraged buyback strategy rather than a sign of distress. Investors should note the company pays no dividend, the fourth quarter (16 weeks) is seasonally the largest, and key risks include competition, rising energy prices, consumer debt levels, supplier concentration (one vendor supplied about 10% of purchases) and a 2016 inventory build that required higher supply chain spending. Management expects to invest at an increased rate in fiscal 2017, and the board increased the buyback authorization by $750 million to $17.9 billion in September 2016.
Oct 24, 2016
2015
AUTOZONE INC Annual Report, Year Ended Aug 29, 2015
AutoZone's fiscal 2015 (year ended August 29, 2015) was a record year: net income rose 8.5% to $1.160 billion, net sales grew 7.5% to $10.187 billion, and diluted EPS increased 14.1% to $36.03. Domestic same-store sales rose 3.8%, driven by lower gas prices (average $2.69/gallon versus $3.48 the prior year), an aging vehicle fleet (average age 11.5 years), and the IMC acquisition. Gross margin improved modestly to 52.3% of sales, while SG&A rose to 33.1% of sales, reflecting higher legal costs and IMC integration. Return on invested capital eased to 31.2% from 32.1%, which management attributes to higher average debt and new investments that are currently diluting operating margins. Capital allocation remained aggressive. AutoZone opened 202 new locations, spent $480.6 million on capex, and repurchased $1.271 billion of stock, funded largely by operating cash flow of $1.525 billion and roughly $300 million of net new debt. The board raised the cumulative buyback authorization by $750 million to $16.4 billion in October 2015, leaving about $838 million available after subsequent repurchases. The company pays no dividend. Its balance sheet carries a stockholders' deficit of $1.70 billion, a common feature of leveraged buyback strategies, but it maintains investment-grade ratings, with adjusted debt to EBITDAR at 2.5x and interest coverage at 5.3x against a 2.5x covenant. Key risks flagged in the filing include slowing demand if vehicle miles or the aging fleet decline, intensifying competition (including consolidation among rivals and online retailers), reliance on vendors and extended payment terms (accounts payable to inventory of 112.9%), and foreign currency exposure to Mexico, where the peso fell about 29% against the dollar during fiscal 2015. Mexican net assets exposed to translation were $366.7 million. Legal matters are modest: a New Jersey groundwater remediation dispute, a California hazardous-waste subpoena, and wage-and-hour class actions, none of which management considers material.
Oct 26, 2015
2014
AUTOZONE INC Annual Report, Year Ended Aug 30, 2014
AutoZone's fiscal 2014 (ended August 30, 2014) was a year of record profitability and continued store expansion. Net sales rose 3.6% to $9.475 billion, driven by a 2.8% domestic same-store sales increase and 190 net new stores, bringing the store base to 5,391 across the U.S., Mexico, and Brazil. Gross margin improved to 52.1% of sales, while operating SG&A rose to 32.8% of sales, leaving operating profit up 3.2% to $1.830 billion. Net income reached a record $1.070 billion (up 5.2%), and diluted EPS grew 13.6% to $31.57, helped by a 7.4% reduction in diluted share count from buybacks. Capital allocation remains debt-funded and buyback-heavy. AutoZone repurchased $1.099 billion of stock in fiscal 2014 and has $869 million left under its authorization after the June 2014 increase to $14.9 billion cumulative. Operating cash flow was $1.341 billion against $438 million of capex, and total debt rose to $4.34 billion. The company carries a stockholders' deficit of $1.62 billion and pays no dividend, a structure that reflects its use of leverage to return capital. Adjusted debt to EBITDAR held at 2.5x, and the company stated its investment-grade ratings are a priority. Accounts payable equal 115% of inventory, which keeps working capital negative. Looking forward, management expects increased investment in fiscal 2015, including new stores, supply chain upgrades, and the roughly $80 million acquisition of Interamerican Motor Corporation, closed in September 2014. Key risks disclosed include competitive pressure from consolidating rivals, reliance on the aging vehicle fleet and miles driven, a New Jersey environmental liability dispute, and a California hazardous waste subpoena. Given the company's leverage and buyback program, investors should weigh continued earnings growth against rising debt and the sensitivity of demand to consumer cash flows and fuel prices.
Oct 27, 2014
2013
AUTOZONE INC Annual Report, Year Ended Aug 31, 2013
AutoZone's fiscal 2013 (53 weeks ended August 31, 2013) was a year of record profitability and continued expansion. Net sales rose 6.3% to $9.148 billion, and net income grew 9.3% to $1.016 billion, with diluted EPS up 18.3% to $27.79. Domestic comparable store sales were flat (0.0%), a sharp slowdown from 3.9% in fiscal 2012, so growth came mainly from 197 new stores (ending at 5,201 locations across the U.S., Mexico and Brazil), the 53rd week (about $177.7 million of sales), and the AutoAnything acquisition. Gross margin improved to 51.8% of sales, helped by lower product acquisition costs, while SG&A held at 32.4% of sales. Management noted that the slowdown in maintenance sales was partly weather-related and that high gas prices and reduced payroll take-home pay are pressuring consumers. Capital allocation remains aggressive. AutoZone repurchased $1.39 billion of stock in fiscal 2013 (3.5 million shares), funded by operating cash flow of $1.415 billion and net new debt. The company pays no dividend. Total debt rose to $4.19 billion, and stockholders' deficit widened to $(1.69) billion, a structural feature of its buyback strategy rather than a sign of distress. Leverage is managed to an adjusted debt-to-EBITDAR ratio of 2.5x, and the interest coverage covenant of 4.68x is well above the 2.50x minimum. Investment-grade ratings are a key stated priority. Key risks include sensitivity to miles driven and gas prices, competition from online and mass merchants, reliance on vendor financing (accounts payable to inventory of 115.6%), and a $18.3 million goodwill impairment plus $4.1 million trade name impairment on AutoAnything. Investors should watch whether same-store sales can recover, whether the new-store program and higher capex per store continue to earn the company's required return (ROIC of 32.7%), and whether the vendor-financing model remains available.
Oct 28, 2013
2012
AUTOZONE INC Annual Report, Year Ended Aug 25, 2012
AutoZone's fiscal 2012 (year ended August 25, 2012) was a strong year by its own measures. Net sales rose 6.6% to $8.604 billion, driven by a 3.9% increase in domestic same-store sales and $214.2 million from new stores. Operating profit grew 8.9% to $1.629 billion, and net income rose 9.6% to a record $930.4 million. Diluted EPS increased 20.6% to $23.48, helped by aggressive share buybacks: the company repurchased $1.363 billion of stock, reducing diluted shares from 43.6 million to 39.6 million. Gross margin improved 50 basis points to 51.5%, reflecting better merchandise margins and lower shrink, while SG&A held roughly flat as a percentage of sales at 32.6%. The balance sheet remains highly levered by design. Stockholders' deficit widened to $1.548 billion, and total debt increased to $3.77 billion. Management is targeting an adjusted debt-to-EBITDAR ratio of 2.5x to preserve investment-grade ratings, and the company reported 4.58x interest coverage against a 2.50x covenant. Operating cash flow was $1.224 billion, slightly below the prior year, mainly because of inventory growth. The company continued expanding, opening 193 net new stores (5,006 total, including 321 in Mexico), and it expects higher capital investment in fiscal 2013. Management also increased the cumulative buyback authorization to $12.65 billion and paid no dividend. Key risks include a dependence on aging-vehicle demand, competitive pressure from both DIY and commercial rivals, sensitivity to gasoline prices and macroeconomic conditions, and reliance on vendor payment terms that support the high accounts payable-to-inventory ratio of 111%. The company also faces a New Jersey groundwater remediation matter, though management does not expect it to be material.
Oct 22, 2012
2011
AUTOZONE INC Annual Report, Year Ended Aug 27, 2011
AutoZone's fiscal 2011 (year ended August 27, 2011) was a record year: net sales rose 9.6% to $8.073 billion, and net income grew 15.0% to $849.0 million. Diluted EPS increased 30.0% to $19.47, helped in part by aggressive share repurchases, which added roughly $1.15 to EPS. Domestic same-store sales grew 6.3%, with commercial sales up 22.3% and retail up 6.8%. Gross margin improved to 51.0% of sales from 50.4%, driven by lower shrink and higher merchandise margins, while SG&A held at 32.5% of sales. The balance sheet remains highly leveraged by design. Stockholders' deficit widened to $(1.25) billion, reflecting $1.47 billion in buybacks during the year, and total debt rose to $3.35 billion. Management reports an adjusted debt-to-EBITDAR ratio of 2.4x and an interest coverage ratio of 4.44x against a 2.50x covenant minimum, and says it remains in compliance with all covenants. Operating cash flow of $1.29 billion comfortably funded capital expenditures of $322 million, with the remainder directed to buybacks and debt. The company also expanded its revolving credit facility to $1.0 billion and authorized an additional $750 million in repurchases, bringing the cumulative authorization to $11.15 billion. Key risks flagged in the filing include the sensitivity of demand to gasoline prices and the broader economy, competitive pressure from both DIY and commercial rivals, and ownership concentration: ESL Investments holds about 29.3% of shares and can exert substantial influence over stockholder votes. Ongoing litigation (the Coalition for a Level Playing Field Robinson-Patman Act case) was dismissed, with the plaintiffs' motion to amend denied, though the company cannot estimate any loss if the case were to continue.
Oct 24, 2011
2010
AUTOZONE INC Annual Report, Year Ended Aug 28, 2010
AutoZone's fiscal 2010 10-K (fiscal year ended August 28, 2010) reports a strong year: net sales rose 8.0% to $7.36 billion, operating profit grew 12.2% to $1.32 billion, and net income increased 12.4% to a record $738.3 million, with diluted EPS up 27.6% to $14.97. Domestic same-store sales grew 5.4%, driven by improved transaction counts, and the company added 213 new stores, ending the year with 4,627 stores across the U.S., Puerto Rico and Mexico. Gross margin held at about 50.4%, and the commercial (DIFM) business grew 13.8%, which management highlighted as a key growth driver. The balance sheet remains highly leveraged by design. Stockholders' deficit widened to $(738.8) million, reflecting aggressive share repurchases of $1.12 billion in fiscal 2010 (and $8.7 billion cumulatively since 1998). Total debt rose to $2.9 billion, and the adjusted debt-to-EBITDAR ratio was 2.4x, which management targets to maintain investment-grade ratings. Operating cash flow was strong at $1.20 billion, and the company's accounts payable-to-inventory ratio of 106% shows vendors financing most of its inventory. Management also raised the repurchase authorization to $9.4 billion in September 2010. Key risks flagged include a concentrated shareholder position (ESL Investments owns about 34.7%), exposure to the Robinson-Patman Act lawsuit (which management considers without merit and cannot estimate), potential rating downgrades from higher leverage, and the future cost impact of healthcare reform. Management also noted that miles driven have been flat, while the growing count of vehicles aged seven years or older has supported demand.
Oct 25, 2010
2009-A
AUTOZONE INC Annual Report (Amendment), Year Ended Aug 29, 2009
This filing is an amendment (10-K/A) to AutoZone Inc.'s (AZO) Annual Report for the fiscal year ended August 29, 2009. The primary purpose of this amendment is to include an exhibit (Exhibit 10.10, a Credit Agreement dated July 9, 2009) that was inadvertently omitted from the original 10-K filing. Investors should note that this amendment does not introduce new financial results or operational updates; it solely rectifies an omission in the original submission and does not reflect any events occurring after the initial filing date. The original 10-K would contain the detailed financial performance and strategic overview for the fiscal year. While this amendment itself doesn't provide that information, it's crucial for ensuring the completeness of the original filing. Investors relying on the comprehensive disclosure of AutoZone's 2009 fiscal year performance should consult the original 10-K filing, supplemented by this amendment for completeness regarding the credit facility.
Oct 27, 2009
2009
AUTOZONE INC Annual Report, Year Ended Aug 29, 2009
AutoZone (AZO) closed fiscal 2009 (52 weeks ended August 29, 2009) with record net income of $657.0 million, up 2.4%, and diluted EPS of $11.73, up 16.8%, helped by a 9.3 million-share buyback costing $1.3 billion. Net sales rose 4.5% to $6.817 billion (6.6% excluding the 53rd week in fiscal 2008), driven by a 4.4% increase in domestic same-store sales. Operating profit grew 4.6% to $1.176 billion, with gross margin steady at 50.1% and operating expenses at 32.9% of sales. Management attributed the sales improvement partly to the credit crisis and higher unemployment, which pushed consumers to keep and maintain older vehicles. Miles driven and the population of vehicles seven years old or older are the company's key demand indicators. The balance sheet became more leveraged. Total debt rose to $2.73 billion from $2.25 billion, after a $500 million 5.75% note issuance in July 2009 and a $300 million term loan prepayment. Stockholders' equity turned negative at $(433) million, down from $230 million, because of aggressive buybacks, cumulative $7.6 billion repurchased since 1998, and pension and currency losses in other comprehensive income. Management reports an adjusted debt/EBITDAR ratio of 2.5x and an interest coverage ratio of 4.19x against a 2.50x covenant, and the company reports compliance with covenants. Working capital is negative at $(145) million, which reflects vendor financing of inventory through an accounts payable to inventory ratio of 96%. Risks flagged in the filing include tightening credit markets, a credit downgrade trigger, competition from national chains and mass merchants, and the concentration of voting control with ESL Investments, which owns about 40% of the stock. A Robinson-Patman Act class action brought by aftermarket distributors seeks unspecified damages, and the company says the suit is without merit. Store count reached 4,417 (4,229 domestic and 188 in Mexico) with 180 new openings in fiscal 2009. Management plans to continue store growth, to increase store property ownership, and to keep returning capital through share repurchases.
Oct 26, 2009
2008
AUTOZONE INC Annual Report, Year Ended Aug 30, 2008
AutoZone (AZO) closed fiscal 2008 (53 weeks ended August 30, 2008) with record net income of $641.6 million, up 7.7%, and diluted EPS of $10.04, up 17.8%, helped by a roughly 4% reduction in diluted share count from buybacks. Net sales rose 5.7% to $6.52 billion, driven by new stores (4,240 total at year-end, including 148 in Mexico), a 1.9-point contribution from the extra week, and domestic same-store sales growth of just 0.4%. Excluding the 53rd week, net income grew 5.1% to $625.8 million and diluted EPS rose 14.9% to $9.80. Management described a challenging macro environment, citing higher gas prices, the credit crisis and rising unemployment, and said customers are more cautious. Commercial (DIFM) sales grew 6.8% while domestic retail grew 4.5%, though management said it remains focused on strengthening the retail business. Balance sheet leverage increased meaningfully. Total debt rose to $2.25 billion from $1.94 billion after the August 2008 issuance of $500 million 6.50% notes due 2014 and $250 million 7.125% notes due 2018, which refinanced commercial paper and the July 2008 maturity. Stockholders' equity fell to $229.7 million from $403.2 million because of $849 million in share repurchases, and return on average equity is now a very high figure, reflecting the thin equity base. Management continued aggressive buybacks, raised the authorization to $6.4 billion (and to $6.9 billion in September 2008), and has no plans to pay a cash dividend. Credit ratings are BBB (S&P), Baa2 (Moody's) and BBB (Fitch), all with stable outlooks. The company also agreed with ESL Investments to target an adjusted debt/EBITDAR ratio of 2.5x, up from 2.1x, by February 2009, which signals tolerance for further leverage. Key risks include a pending Robinson-Patman Act class action brought by aftermarket distributors (which the company calls without merit), exposure to fuel prices and distribution costs, vendor and competitor consolidation, tightening credit markets that could limit vendor financing of inventory, and possible credit rating downgrades if leverage rises further. Investors should weigh strong cash generation (operating cash flow of $921 million) and disciplined store growth against a more fragile consumer backdrop and a rapidly shrinking equity base.
Oct 27, 2008
2007
AUTOZONE INC Annual Report, Year Ended Aug 25, 2007
AutoZone, Inc. (AZO) closed fiscal 2007 (52 weeks ended August 25, 2007) with net sales of $6.170 billion, up 3.7% from $5.948 billion, driven mainly by new store growth. Domestic same-store sales were essentially flat at +0.1%, and domestic commercial sales declined 0.4%, so growth came almost entirely from store count. Operating profit rose 4.5% to $1.055 billion, and diluted EPS increased 13.6% to $8.53, helped by a gross margin gain to 49.7% and roughly $0.14 of accretion from share repurchases. Operating, selling, G&A expenses rose to 32.6% of sales from 32.4%, mainly due to higher occupancy costs. Cash generation was solid, with operating cash flow of $845.2 million. The company returned substantial capital to shareholders, spending $761.9 million on buybacks (6.0 million shares) and funding them largely from operations and, at times, debt. Total debt was $1.94 billion, and stockholders' equity fell to $403.2 million, reflecting the aggressive repurchase program. Management's return on invested capital was 22.7%, though this is a non-GAAP measure that capitalizes operating leases. The company paid no dividend and had $5.9 billion in cumulative buyback authorization, with about $458 million remaining. Key risks include slowing same-store sales momentum, competition from national chains and mass merchandisers, vendor consolidation, rising energy and fuel costs, and an ongoing Robinson-Patman Act lawsuit brought by aftermarket distributors, which management considers without merit. Store growth continued, with 186 new stores opened in fiscal 2007 and 4,056 total stores at year-end. Investors should weigh the company's strong earnings growth and buyback-driven EPS gains against near-zero comparable sales growth and rising occupancy costs.
Oct 22, 2007
2006
AUTOZONE INC Annual Report, Year Ended Aug 26, 2006
AutoZone (AZO) reported fiscal 2006 (52 weeks ended August 26, 2006) net sales of $5.948 billion, up 4.2% from $5.711 billion, driven mainly by new store openings. Same-store sales rose only 0.4%, and commercial sales fell 1.1% while retail DIY sales grew 4.9%. Net income declined 0.3% to $569.3 million, but diluted EPS rose 4.5% to $7.50, helped by a roughly 4% reduction in diluted share count from $578 million of buybacks. Fiscal 2006 absorbed a $17.4 million pre-tax share-based compensation expense from adopting SFAS 123(R), which lowered diluted EPS by $0.14. Operating profit grew 3.5% to $1.01 billion, and operating cash flow rose sharply to $822.7 million from $648.1 million. Balance sheet and capital allocation remain central to the story. Stockholders' equity was only $469.5 million, a result of cumulative repurchases of about $4.7 billion since 1998, and return on average equity is not meaningful for investors to compare against peers. Total debt was roughly flat at $1.86 billion, with a 5.5% weighted average borrowing rate and BBB+/Baa2 credit ratings. Inventory turnover declined to 1.7x from 1.8x, though the accounts payable to inventory ratio held at 92%, showing that vendors continue to finance inventory growth. The company operated 3,871 stores (3,771 domestic and 100 in Mexico) and opened 185 net new domestic stores, though same-store sales growth and the slowing commercial business are the key watch items. Risks disclosed include competition from national chains and mass merchants, consolidation among vendors and competitors, energy and fuel price exposure, and pending litigation. The most notable legal matters are a Robinson-Patman Act suit by aftermarket distributors (the company calls it without merit) and a California used-oil handling suit seeking $12.0 million in penalties. Management reported effective internal controls, and Ernst & Young issued an unqualified opinion.
Oct 25, 2006
2005-A
AUTOZONE INC Annual Report (Amendment), Year Ended Aug 27, 2005
Autozone Inc.'s 10-K/A filing for the fiscal year ended August 27, 2005, primarily serves as an amendment to its original 10-K, addressing a technical issue with the Section 302 certifications. For investors, the key takeaway is that the core financial and operational information from the initial 10-K remains the basis for analysis. The company reported a market capitalization of approximately $5.5 billion as of November 18, 2005, with over 76.6 million shares outstanding, indicating a significant presence in the automotive retail sector. While this amendment doesn't introduce new financial performance data, it underscores the company's compliance with SEC reporting standards. Investors should refer to the original 10-K filing for detailed financial statements, management's discussion and analysis, and risk factors. The incorporation of the 2005 Annual Report and upcoming Proxy Statement into this filing further suggests the company is committed to transparency and providing comprehensive information to its shareholders.
Dec 9, 2005
2005
AUTOZONE INC Annual Report, Year Ended Aug 27, 2005
AutoZone's fiscal 2005 (ended August 27, 2005) showed modest top-line growth with weakening underlying demand. Net sales rose 1.3% to $5.71 billion, driven mainly by store growth, while same-store sales declined 2%, and transaction counts fell in both the DIY and commercial businesses. Commercial sales fell 3.0%, offset by growth in ALLDATA and Mexico. The company ended the year with 3,673 stores (3,592 domestic and 81 in Mexico) and opened 175 net new domestic stores. Profitability was pressured by a $40.3 million pre-tax non-cash lease accounting charge and a sharp drop in vendor warranty gains ($1.7 million versus $42.1 million the prior year). Operating profit fell 2.3% to $975.7 million. Net income rose only 0.9% to $571.0 million, but diluted EPS grew 9.5% to $7.18, helped by a 7.9% reduction in diluted share count and a $21.3 million one-time tax benefit tied to planned repatriation of Mexican earnings. Operating cash flow was $648.1 million, and cash flow before share repurchases and debt changes was $432.2 million. AutoZone continued to return capital aggressively, spending $426.9 million on buybacks in fiscal 2005 (after $848.1 million in 2004), with $298.2 million remaining under its $4.4 billion authorization. Stockholders' equity rebounded to $391.0 million from $171.4 million, but the company remains highly leveraged, with total debt of $1.86 billion and interest expense rising to $102.4 million. Key risks include negative same-store sales, pending litigation from aftermarket distributors (Coalition for a Level Playing Field), a $12.0 million California used-oil lawsuit, and increased competition and vendor consolidation.
Oct 26, 2005
2004
AUTOZONE INC Annual Report, Year Ended Aug 28, 2004
AutoZone's fiscal 2004 (ended August 28, 2004) was a year of solid top-line growth but flat same-store sales and a sharp deterioration in the back half. Net sales rose 3.3% to $5.637 billion, driven by new store openings (202 net new domestic stores, 3,483 total stores including 63 in Mexico) and commercial sales growth of 10.5%, while same-store sales were flat for the year after a 3% decline in the fourth quarter. Management attributed the late-year softness to rising gasoline prices and fewer miles driven per vehicle, which reduced transaction counts for both DIY and commercial customers. Profitability improved on the surface. Net income rose 9.4% to $566.2 million and diluted EPS grew 22.8% to $6.56, helped by a 48.9% gross margin (up from 46.1%), $42.1 million in one-time vendor warranty negotiation gains, and the EITF 02-16 accounting reclassification of vendor funding, which added $138.2 million to gross profit but an equal amount to operating expenses. Operating, selling, general and administrative expenses rose to 31.2% of sales from 29.3%, so the gross margin gain was largely reinvested in expenses rather than falling to operating profit. Investors should note that the share count reduction (aggressive buybacks of $848 million in fiscal 2004) contributed roughly $0.20 to EPS. The balance sheet became considerably more leveraged. Total debt rose to $1.87 billion from $1.55 billion, and stockholders' equity fell to $171 million from $374 million as cumulative buybacks exceeded retained earnings. Return on average equity of 208% reflects this small equity base rather than operating efficiency. Management reports covenant compliance, a BBB+ S&P rating with a negative outlook from Moody's (Baa2), and an expectation to open roughly 200 stores in fiscal 2005.
Oct 27, 2004
2003
AUTOZONE INC Annual Report, Year Ended Aug 30, 2003
AutoZone (AZO) reported fiscal 2003 (52 weeks ended August 30, 2003) net sales of $5.457 billion, up 2.5% from $5.326 billion in the 53-week fiscal 2002, or 4.6% excluding the extra week. Net income rose 20.9% to $517.6 million and diluted EPS rose 33.5% to $5.34. Management attributes the margin expansion to a 1.5-point gross margin improvement (46.1% of sales) and a 0.8-point reduction in SG&A as a percentage of sales (29.3%). Operating profit grew 19% to $917.8 million, and the company cites comparable operating margin of 16.8%, up 2.6 points, excluding non-recurring items. Several items affected the comparison, including the adoption of EITF 02-16 on vendor funding, a $4.6 million property disposal gain, and a $4.7 million TruckPro-related gain. The fiscal 2002 comparison was also flattered by the extra week. The balance sheet and capital structure changed significantly. Long-term debt rose to $1.55 billion from $1.19 billion, funding about $891 million of share repurchases. Stockholders' equity fell to $374 million from $689 million, and return on average equity was 97%. The company does not pay a cash dividend. Operating cash flow was $698 million, and capital expenditures were $182 million. Management plans to open about 195 stores in fiscal 2004, and it expects to rely mainly on internally generated funds with the balance coming from borrowings. Key risks include a Robinson-Patman Act class action brought by about 225 plaintiffs, with an appeal argued November 5, 2003 and a reinstatement motion pending. Moody's changed its outlook on AutoZone to negative after fiscal year-end, which could raise borrowing costs if ratings fall further. Competition from national chains, mass merchants, and consolidated vendors also remains a risk factor. Investors should weigh the strong earnings growth and aggressive buybacks against the thin equity base and rising leverage.
Oct 30, 2003
2002
AUTOZONE INC Annual Report, Year Ended Aug 31, 2002
AutoZone, Inc. (AZO) reported strong financial performance for the fiscal year ending August 31, 2002. The company demonstrated significant revenue growth, driven by both comparable store sales increases and the addition of new store locations. Profitability also saw a substantial improvement, partly due to enhanced gross margins resulting from lower product costs, efficient supply chain management, and a strategic shift towards higher-margin merchandise. The company's operational efficiency was further boosted by a favorable decline in operating expenses as a percentage of net sales. Significant investments were made in store development, alongside ongoing efforts in share repurchases, indicating a commitment to shareholder value. The company's strategic focus on customer service, combined with a robust merchandising strategy and convenient store locations, continues to support its market leadership in the automotive parts and accessories sector. Despite facing a competitive landscape and potential economic uncertainties, AutoZone's business model appears resilient, supported by a strong balance sheet and effective financial management. The company's expansion into Mexico and its commercial sales program (AZ Commercial) also contribute to its diversified revenue streams.
Oct 31, 2002
2001-A
AUTOZONE INC Annual Report (Amendment), Year Ended Aug 25, 2001
AutoZone's fiscal 2001 (ended August 25, 2001) was a year of sharp earnings contraction driven largely by a one-time restructuring. Net sales rose 7.5% to $4.82 billion, with same-store sales up 4% and 166 net new domestic stores added to reach 3,019 locations. However, the company recorded $156.8 million in pretax restructuring and impairment charges (about $0.84 per share after tax), which pushed operating profit down 24% to $387.7 million and diluted EPS down to $1.54 from $2.00. Excluding these charges, pretax income would have been about $443.8 million, so the underlying business remained profitable, though gross margin pressure from insurance and payroll costs and higher interest expense were headwinds. The charges reflect a strategic review under which management set a 15% after-tax return threshold for all investments. The review led to closing 51 underperforming stores, writing down real estate projects and excess properties, exiting the TruckPro heavy-duty truck parts business (now being sold), and rationalizing inventory. Management also reported a 2001 Robinson-Patman Act lawsuit seeking roughly $1 billion in damages, which it believes lacks merit and is not likely to be material. Balance sheet and capital allocation changed meaningfully. Stockholders' equity fell to $866 million from $992 million, as the company repurchased $366 million of stock in fiscal 2001 and retired treasury shares. Total debt was roughly flat at $1.23 billion, but its mix shifted toward longer-term notes and term loans, and the debt-to-capital ratio rose to 58.6% from 55.7%. Operating cash flow was solid at $459 million, and the board added a $250 million repurchase authorization after year-end. Investors should weigh the strong store growth and cash generation against thinner margins, a higher leverage profile, and the uncertainty around the pending lawsuit.
Mar 4, 2002
2000-A
AUTOZONE INC Annual Report (Amendment), Year Ended Aug 26, 2000
AutoZone's amended 10-K (Form 10-K/A) covers fiscal 2000, the 52 weeks ended August 26, 2000. It was filed to physically attach excerpts of the annual report (Exhibit 13.1) that had previously been incorporated by reference; the financial information is unchanged. Fiscal 2000 was a strong year on the top and bottom lines. Net sales rose 8.9% to $4.48 billion, driven by 204 net new domestic stores (ending at 2,915) and a 5% comparable store sales increase. Operating profit grew 18% to $512.0 million, and operating margin expanded to 11.4% from 10.5%, mainly from leverage of payroll and occupancy costs in acquired stores. Net income rose 9.3% to $267.6 million, and diluted EPS increased 23% to $2.00 from $1.63, helped by a 14% reduction in weighted average diluted shares from aggressive buybacks. The balance sheet and capital structure changed materially. The company repurchased 23.2 million shares for $607.6 million in fiscal 2000, bringing cumulative repurchases since 1998 to $870.9 million against a $1.25 billion authorization. Funding this with debt pushed long-term debt to $1.25 billion from $888 million, raised debt-to-capital to 55.7% from 40.2%, and reduced stockholders' equity to $992 million from $1.32 billion. Interest expense rose to $76.8 million from $45.3 million. Gross margin slipped to 41.9% from 42.1%, primarily due to higher warranty expense. Operating cash flow of $513 million comfortably funded $250 million of capital expenditures. Investors should weigh the growth and margin progress against higher leverage and litigation exposure. The company disclosed a Robinson-Patman Act suit by warehouse distributors and jobbers seeking roughly $1 billion in damages, which it considers without merit, along with California store manager overtime class actions. Management also noted that the fourth quarter (sixteen weeks) represented 33.3% of annual sales and 39.3% of net income, underscoring seasonality. Subsequent to year end, the company repurchased 4.5 million shares at $26.54 per share to settle equity instrument contracts, and the board later approved an additional $100 million in buybacks.
Mar 4, 2002
1998-A
AUTOZONE INC Annual Report (Amendment), Year Ended Aug 29, 1998
This amended Form 10-K (10-K/A) for AutoZone's fiscal year ended August 29, 1998 was filed to attach the Annual Report excerpts (Exhibit 13.1) physically, rather than incorporating them by reference. Note that the document's content is from fiscal 1998 and its auditor's report is dated September 30, 1998. The stated filing date of March 4, 2002 does not match the document, so investors should verify the filing date against EDGAR. The filing reports a strong year: net sales rose 20.5% to $3.24 billion, operating profit rose 19% to $382.3 million, and net income rose 16.9% to $227.9 million, or $1.48 per diluted share versus $1.28 a year earlier. Growth was driven mainly by store expansion, with net new stores up 929 to 2,657, including the acquisitions of Chief Auto Parts (560 stores, primarily in California), Auto Palace (112 stores in the Northeast), and TruckPro (43 heavy-duty truck parts stores). Comparable store sales grew only 2%, and gross margin slipped to 41.7% from 42.0%, reflecting lower commodities margins and weaker margins at recently acquired stores. The balance sheet expanded sharply, with total assets of $2.75 billion (up from $1.88 billion) and long-term debt of $545 million (up from $198 million). Much of the increase reflects the $200 million 6.5% Debentures due 2008 issued in July 1998, $305 million of commercial paper, and the assumption of acquired companies' debt. Debt-to-capital rose to 29.5% from 15.6%. Operating cash flow improved to $366.8 million from $177.6 million, driven mainly by better inventory turnover and favorable supplier payment terms, which the company relies on to finance inventory growth. Capital expenditures were $337.2 million. Management also disclosed a subsequent agreement to acquire real estate and leases for roughly 100 Express stores from Pep Boys for about $108 million, and a pending class action against Chief Auto Parts over California rest-period practices, which management could not predict the outcome of. For investors, the key trade-offs were rapid, acquisition-fueled growth and higher leverage against a return on average equity of 19%, down from 20%, and a 2% comparable store sales increase that signaled slowing organic growth. The fourth quarter, a 16-week period, contributed 37.5% of annual sales and 40.4% of net income, which makes the business highly seasonal.
Mar 4, 2002
2001
AUTOZONE INC Annual Report, Year Ended Aug 25, 2001
AutoZone, Inc. (AZO) filed its Form 10-K for fiscal year ended August 25, 2001, on November 16, 2001. The company describes itself as the nation's leading specialty retailer of automotive parts and accessories, serving mainly do-it-yourself (DIY) customers, with 3,019 U.S. stores and 21 in Mexico at year-end. It also operates a commercial sales program that services 1,638 stores and has opened 39 hub stores, and it owns the ALLDATA diagnostic and repair information subsidiary. Store growth has slowed sharply: management says it does not plan to continue the historic pace of roughly 16% annual store count growth, and new store openings fell to 107 in fiscal 2001 from 952 in fiscal 1998. Future sales growth will therefore depend more on same-store sales gains and commercial and international expansion. The filing's financial statements, MD&A, and market data are incorporated by reference from the Annual Report to Stockholders (Exhibit 19.1), so this 10-K body does not include detailed income or balance sheet figures. Key information for investors is the non-financial disclosure: about 44,600 employees, a store base with 1,238 leased and 1,781 owned stores, and a stated everyday low price strategy. The market value of non-affiliate shares was about $4.03 billion as of October 15, 2001, with 107.8 million shares outstanding. Management changes are notable, with Steve Odland recently named CEO and the CFO, Robert Hunt, announcing his retirement. The main legal risk is the Coalition for a Level Playing Field lawsuit, which alleges Robinson-Patman Act violations and seeks roughly $1 billion in damages including trebling. A court overruled a substantial portion of the defendants' motion to dismiss on October 23, 2001. Management believes the suit is without merit. The company also faces risks from vendor and competitor consolidation, its limited international experience, and war or terrorism disrupting imports and transportation.
Nov 16, 2001
2000
AUTOZONE INC Annual Report, Year Ended Aug 26, 2000
AutoZone, Inc. filed its 2000 Form 10-K, reporting on its fiscal year ended August 26, 2000. The company is the leading specialty retailer of automotive parts and accessories, primarily serving the do-it-yourself (DIY) market, with 2,915 auto parts stores across 42 states and 13 in Mexico. AutoZone also operates a commercial sales program in 1,486 domestic stores, serving repair garages and dealers, and has a heavy-duty truck parts division (TruckPro) and an automotive diagnostic software subsidiary (ALLDATA). The company emphasizes superior customer service, a broad product selection (16,000-21,000 SKUs per store), everyday low pricing, and strategic store design. Its growth strategy centers on expanding its store base in existing and new markets, both organically and through potential acquisitions, while also aiming to increase sales at existing stores. Management acknowledges the need to balance rapid store growth with the increasing demand for qualified employees and potential saturation in certain markets.
Oct 27, 2000
1998
AUTOZONE INC Annual Report, Year Ended Aug 29, 1998
AutoZone, Inc. (AZO) filed its Form 10-K for the fiscal year ended August 29, 1998, describing itself as the nation's leading specialty retailer of automotive parts and accessories, with a primary focus on do-it-yourself (DIY) customers. At fiscal year-end the company operated 2,657 auto parts stores in 38 states under the "AutoZone" and "Chief" names, plus 43 TruckPro heavy-duty truck parts stores and the ALLDATA diagnostic software subsidiary. Net sales grew from $1.5 billion in fiscal 1994 to $3.2 billion in fiscal 1998. Store count nearly doubled during fiscal 1998, driven largely by the acquisitions of Chief Auto Parts and Auto Palace, which added 672 stores, and new store openings rose to 952 from 308 the prior year. The filing's central investor theme is growth through acquisition and expansion, with the associated execution risks spelled out explicitly. Management acknowledges it does not expect to sustain the historic store-count growth rate (averaging 28% per year over five years), that converting the Chief stores to the AutoZone format may not be timely or profitable, and that the smaller Chief stores may never match the sales of traditional AutoZone locations. Employee count rose 34% to about 38,500 during the year, and the company flags difficulty hiring and retaining qualified staff. Recent capital moves include the roughly $108 million purchase of real estate tied to 100 Express stores acquired from Pep Boys and the issuance of $150 million of 6% Notes due 2003, with proceeds used to pay down bank borrowings. Legal and regulatory items to monitor include a certified California class action (Winfrey v. Chief Auto Parts) alleging denial of mandated rest periods to hourly employees, which the company describes as potentially substantial in aggregate though minimal per plaintiff, and a dismissed battery-sales class action. The filing also notes that U.S. EPA rules on on-board diagnostic access could affect DIY and installer businesses, and that merger activity among competitors and vendors could alter the competitive landscape. Full financial statements, MD&A, and selected financial data are incorporated by reference from the Annual Report to Stockholders (Exhibit 13.1), which was not included in the content provided.
Nov 25, 1998
1997
AUTOZONE INC Annual Report, Year Ended Aug 30, 1997
AutoZone's fiscal 1997 10-K (fiscal year ended August 30, 1997) describes a company that continued to execute a rapid store expansion strategy while delivering record financial results. Sales rose 20% to $2.69 billion, operating profit grew 19% to $321 million, and net income increased 17% to $195 million, or $1.28 per share. Comparable store sales increased 8%, and the company ended the year with 1,728 stores in 32 states after a net addition of 305 stores, a roughly 23% increase in square footage. Management also highlights the entry into five new states (California, Iowa, Maryland, Nevada, and New York) and the first profitable year for its commercial sales program, which now accounts for more than 10% of sales. The key watch items for investors are margin and balance sheet trends. The operating expense ratio rose from 29.7% to 30.1% of sales, driven by ALLDATA and commercial program costs, although gross margin improved to 42.0% from 41.7%. Debt rose sharply to $198.4 million from $94.4 million as the company financed inventory growth, and inventory turnover fell to 2.5x from 2.7x. Return on average equity declined to 20% from 22%, and return on capital dropped to 16% from 18%. Management expects roughly 350 new stores in fiscal 1998 and continued reliance on supplier payment terms to fund inventory growth. The filing also discloses two purported class actions alleging the company sold old or used batteries as new. One case was dismissed without prejudice in September 1997, while the other, filed in October 1997, is being contested by management, which considers the claims without merit. The company does not expect other pending litigation to have a material adverse effect. Overall, the filing portrays a growth story with strong earnings momentum, offset by rising leverage, working capital intensity, and modest margin pressure from new initiatives.
Nov 6, 1997
1996
AUTOZONE INC Annual Report, Year Ended Aug 31, 1996
AutoZone's fiscal 1996 10-K (fiscal year ended August 31, 1996, a 53-week year) shows a company in rapid expansion and still growing profitably. Net sales rose 24% to $2.24 billion, operating profit increased 18% to $268.9 million, and net income grew 20% to $167.2 million, or $1.11 per share. Comparable store sales increased 6%, and gross margin improved modestly to 41.7% of sales. The results were partly offset by a higher SG&A ratio (29.7% vs. 28.9%), driven by ALLDATA acquisition costs and startup costs for the commercial sales program. Operating margin slipped to 12.0% from 12.6%, and net margin to 7.5% from 7.7%. The 53rd week contributed to the top-line figures, so growth on a comparable basis is somewhat lower than reported. The central investment story is store growth. AutoZone opened a record 280 net new stores, ending the year with 1,423 stores in 27 states, and plans roughly 335 openings in fiscal 1997, which implies about 26% growth in square footage. Management is also pushing into the professional repair shop market through a commercial sales program now in 1,183 stores. Management acknowledges that this program is currently unprofitable and that there is no assurance it will improve results. The company also acquired ALLDATA, a diagnostic software business, in a pooling-of-interests transaction. Balance sheet and cash flow both show the cost of expansion. Inventory rose $160 million to $556 million, and capital expenditures reached $288 million against $174 million of operating cash flow. Revolver borrowings climbed to $94.4 million from $9.5 million, and debt-to-capital rose to 9.8% from 1.9%. Return on average equity remained strong at 22%. The filing also notes that KKR's ownership fell from about 43% to about 13%, which reduces the influence of a major shareholder.
Nov 27, 1996