10-KPeriod: FY2018

AUTOZONE INC Annual Report, Year Ended Aug 25, 2018

Filed October 24, 2018For Securities:AZO

Summary

AutoZone, Inc. (AZO) reported a record net income of $1.338 billion for fiscal year 2018, a 4.4% increase over the prior year, with total sales growing by 3.1% to $11.221 billion. This growth was driven by both retail and commercial sales, indicating progress in customer service initiatives and commercial expansion. The company noted that the automotive aftermarket industry is competitive, with factors like vehicle age, energy prices, and economic conditions influencing demand. AutoZone highlighted the aging vehicle population in the U.S. (average age of 11.7 years) as a positive driver for demand for maintenance and repair parts. The company also emphasized its continued investment in expanding its store footprint and enhancing its supply chain and distribution network, including the expansion of "mega hubs" to improve product availability.

Financial Highlights

49 data points
Beta

Revenue

$11.22B

53.2% Gross Margin

Net Income

$1.34B

11.9% Net Margin

EPS (Diluted)

$48.77

Total Assets

$9.35B

Cash & Equivalents

$217.82M

Free Cash Flow

$1.56B

Financial Statements
Beta
Revenue$11.22B
Cost of Revenue$5.25B
Gross Profit$5.97B
SG&A Expenses$4.16B
Operating Income$1.81B
Interest Expense$181.67M
Net Income$1.34B
EPS (Basic)$49.59
EPS (Diluted)$48.77
Shares Outstanding (Basic)26.97M
Shares Outstanding (Diluted)27.42M

Key Highlights

  • 1Record Net Income: Achieved $1.338 billion in net income for fiscal year 2018, a 4.4% increase year-over-year.
  • 2Sales Growth: Total net sales increased by 3.1% to $11.221 billion, supported by growth in both retail and commercial segments.
  • 3Aging Vehicle Fleet: The average age of vehicles on the road, at 11.7 years, is a key factor supporting demand for replacement parts.
  • 4Commercial Sales Expansion: Domestic commercial sales saw a significant increase of 7.3% ($151.4 million).
  • 5Supply Chain Enhancements: Implemented increased delivery frequencies to domestic stores and expanded 'mega hub' inventory to enhance product availability.
  • 6Share Repurchases: Continued substantial share repurchase program, with $1.592 billion spent in fiscal year 2018.
  • 7Tax Reform Impact: Benefited from the Tax Cuts and Jobs Act, which lowered the effective tax rate to 18.3% in fiscal 2018.

Frequently Asked Questions

AutoZone's sales growth is primarily driven by the net sales from new domestic store openings, increases in same-store sales, and the expansion of its commercial sales program. The aging vehicle population in the U.S., which requires more maintenance and repairs, is a significant long-term factor supporting demand for its products.

AutoZone competes on customer service, product availability, quality, and price. It is investing in its supply chain and distribution network, including 'mega hubs' and increased delivery frequencies, to improve product availability. The company also sells through its website, www.autozone.com, and a commercial portal, www.autozonepro.com, to cater to evolving customer purchasing habits.

The Tax Cuts and Jobs Act significantly reduced AutoZone's effective income tax rate to 18.3% in fiscal year 2018, compared to 33.5% in fiscal year 2017. This was due to a permanent reduction in the U.S. corporate income tax rate and a one-time transition tax on foreign earnings. This tax benefit contributed to the company's record net income for the year.

AutoZone continues to expand its store footprint, focusing on markets with identified expansion opportunities and strategic site selection based on demographics, vehicle profiles (especially older vehicles), commercial business presence, and competitor strength. The company aims for high-visibility, high-traffic locations and employs a clustering strategy in new markets. They also evaluate strategic acquisitions.