10-QPeriod: Q2 FY2002

AUTOZONE INC Quarterly Report for Q2 Ended Feb 9, 2002

Filed March 26, 2002For Securities:AZO

Summary

AutoZone, Inc. reported strong performance for the second quarter and first half of fiscal year 2002, demonstrating significant growth in net sales and operating profit. Net sales increased by 11.0% for the twelve weeks ended February 9, 2002, driven by a robust 12% increase in comparable store sales. This growth, coupled with improved gross margins and disciplined expense management, led to a substantial rise in net income and earnings per share compared to the prior year period. The company also made significant progress in its operational efficiency and strategic initiatives. Restructuring charges from the previous fiscal year continued to yield benefits, contributing to lower operating expenses as a percentage of sales. Furthermore, AutoZone's commitment to returning capital to shareholders is evident through its ongoing share repurchase program. The company appears well-positioned financially, with solid operating cash flow and access to credit facilities, despite some ongoing legal matters.

Key Highlights

  • 1Net sales for the twelve weeks ended February 9, 2002, increased by 11.0% to $1.08 billion, driven by a 12% increase in comparable store sales.
  • 2Gross profit margin improved to 43.9% for the quarter, up from 40.8% in the prior year, attributed to inventory corrections, improved margins on new merchandise, and lower costs.
  • 3Operating, selling, general, and administrative expenses decreased as a percentage of net sales to 32.7% from 32.9% in the prior year, reflecting expense leverage and operational savings.
  • 4Net income for the quarter more than doubled to $63.8 million from $31.7 million in the prior year, with diluted EPS rising to $0.58 from $0.28.
  • 5Operating cash flow significantly improved, generating $120.2 million for the twenty-four weeks ended February 9, 2002, compared to $6.2 million used in the prior year period.
  • 6Capital expenditures were reduced to $40.6 million for the first half of fiscal 2002 from $93.1 million in the prior year, alongside the sale of the TruckPro business.
  • 7The company announced a new board approval to repurchase up to an additional $300 million of common stock, underscoring a commitment to shareholder returns.

Frequently Asked Questions

The primary driver of AutoZone's sales growth was a significant increase in comparable store sales, which rose by 12% for the twelve weeks ended February 9, 2002. This indicates strong performance from existing stores, in addition to the growth from new store openings.

The restructuring and impairment charges from the previous year, particularly those related to store closures and operational efficiencies, contributed to lower operating expenses as a percentage of sales in the current quarter. The company also benefited from improved gross margins, partly due to inventory adjustments made in the prior year that were corrected in the current period.

AutoZone continues to focus on returning capital to shareholders through a significant share repurchase program. The company announced board approval for an additional $300 million in stock repurchases, building on its existing authorization. This demonstrates management's confidence in the company's financial position and its commitment to enhancing shareholder value.

AutoZone is involved in a lawsuit concerning alleged violations of the Robinson-Patman Act, seeking substantial damages. However, the company is vigorously defending itself, believes the suit to be without merit, and currently estimates that the outcome will not be material to its financial condition or results of operations. Other legal proceedings are also considered not material in aggregate.