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AUTOZONE INC Annual Report, Year Ended Aug 25, 2007

Filing Date
Filed October 22, 2007
Period End
August 25, 2007
Security
AZO
In the record · 2016–202610-K1010-Q328-K127

AZO filed 10 annual reports (10-K), 32 quarterly reports (10-Q) and 127 current reports (8-K) between 2016 and 2026.

  1. Material agreement8-K · Apr ’17Apr ’17
  2. Leadership change8-K · Oct ’19Oct ’19
  3. Leadership change8-K · Oct ’21Oct ’21
  4. FY2025 annual report10-K · Oct ’25Oct ’25

01—Abstract

Summary

Summary of the 10-K filed October 22, 2007. Cited figures are marked; the original filing is the authoritative source.

AutoZone, Inc. (AZO) closed fiscal 2007 (52 weeks ended August 25, 2007) with net sales of $6.170 billiona, 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 billionb, 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 millionc. 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 billiond 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.

02—Key points

Key Highlights

  1. Net sales rose 3.7% to $6.170 billion, but domestic same-store sales grew only 0.1%, so growth was driven by store expansion (4,056 total stores, up from 3,871).
  2. Diluted EPS increased 13.6% to $8.53 versus $7.50, aided by share repurchases (about $0.14 accretion) and a higher gross margin of 49.7%.
  3. Operating cash flow was $845.2 million, and the company repurchased $761.9 million of stock in fiscal 2007.
  4. Stockholders' equity declined to $403.2 million from $469.5 million as buybacks outpaced earnings retention; total debt was $1.94 billion.
  5. Domestic commercial sales decreased 0.4%, signaling weakness in the DIFM business that the company is trying to grow.
  6. Operating, SG&A expenses rose to 32.6% of sales, largely from higher occupancy costs tied to new stores.
  7. Management is pursuing growth through new stores, with no dividend paid, and faces a Robinson-Patman Act lawsuit it describes as without merit.

03—Questions

Frequently Asked Questions

  1. How much of AutoZone's sales growth came from same-store sales versus new stores?

    Almost all of it came from new stores. Net sales grew 3.7%, while domestic same-store sales rose only 0.1%. The company opened 186 new stores in fiscal 2007 and ended the year with 4,056 stores.

  2. Why did EPS grow faster than net income?

    Net income rose 4.6% to $595.7 million, but diluted EPS rose 13.6% to $8.53. The gap reflects a 7.0% reduction in weighted diluted shares (from 75.9 million to 69.8 million) due to share repurchases of $761.9 million during the year.

  3. Is AutoZone's balance sheet risky given the buybacks?

    Leverage has risen. Debt stands at about $1.94 billion against equity of $403 million, and the company funds buybacks partly with debt. Still, it reports compliance with all debt covenants and holds investment-grade ratings (BBB+ at S&P, Baa2 at Moody's), with $680 million available under its revolving facilities.

  4. What are the main risks investors should monitor?

    Key risks include slowing growth in same-store sales, rising competition from chains and mass merchandisers, vendor consolidation that could raise purchase costs, higher energy and fuel prices, and the pending Robinson-Patman Act lawsuit by aftermarket distributors seeking unspecified damages and an injunction against opening new stores.

04—Continue

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