10-QPeriod: Q1 FY2002

AUTOZONE INC Quarterly Report for Q1 Ended Nov 17, 2001

Filed December 18, 2001For Securities:AZO

Summary

AutoZone Inc. reported its third-quarter 2001 results, demonstrating solid revenue growth and an improvement in gross margin. Net sales increased by 10.6% year-over-year, driven by a 9% increase in comparable store sales. This top-line growth, coupled with disciplined expense management and favorable commodity pricing, led to a significant expansion in operating profit. The company continued its strategic store rationalization, closing 35 domestic auto parts stores as part of a broader restructuring and impairment charge taken in the previous fiscal year. Despite this, AutoZone is focused on future growth, with plans to open approximately 100 new domestic stores in fiscal year 2002. Financially, AutoZone maintained a strong liquidity position, supported by significant revolving credit facilities and internally generated funds, while continuing its share repurchase program.

Key Highlights

  • 1Net sales for the twelve weeks ended November 17, 2001, increased by 10.6% to $1.176 billion compared to the prior year's period.
  • 2Comparable store sales, a key metric for retail performance, increased by 9% year-over-year.
  • 3Gross profit margin improved to 43.9% from 41.9% in the prior year's comparable period, driven by better commodity prices and higher-margin new merchandise.
  • 4Operating expenses as a percentage of net sales decreased to 30.7% from 31.5%, benefiting from expense leverage and restructuring savings.
  • 5The company reported basic EPS of $0.78 and diluted EPS of $0.76, a significant increase from $0.46 in the prior year.
  • 6AutoZone continues its share repurchase program, having repurchased approximately $1.48 billion worth of common stock since January 1998.
  • 7The company is undertaking a strategic review resulting in restructuring and impairment charges of $156.8 million in fiscal 2001, including the closure of 51 domestic stores.

Frequently Asked Questions

Sales growth was primarily driven by a 10.6% increase in net sales, with comparable store sales up by 9%. This indicates strong performance from existing stores and continued customer demand for AutoZone's products.

The company recorded significant restructuring and impairment charges of $156.8 million in fiscal 2001, which included the closure of 51 stores. While these charges impacted profitability in the prior period, the current quarter shows improved operating performance, suggesting the company is moving past the impact of these charges.

AutoZone maintains a strong liquidity position, with $7.285 million in cash and cash equivalents and access to $1.05 billion in revolving credit facilities. The company anticipates funding its capital expenditures, working capital needs, and stock repurchases primarily through internally generated funds, supplemented by borrowings.

AutoZone is a defendant in a lawsuit alleging violations of the Robinson-Patman Act, with plaintiffs seeking over $1 billion in damages. However, AutoZone vigorously defends the suit, believes it is without merit, and currently does not expect it to result in liabilities material to its financial condition or results of operations.