10-QPeriod: Q2 FY2003

AUTOZONE INC Quarterly Report for Q2 Ended Feb 15, 2003

Filed March 19, 2003For Securities:AZO

Summary

AutoZone Inc. reported solid financial performance for the fiscal second quarter ending February 15, 2003. The company demonstrated growth in net sales, driven by a 2.4% increase in comparable store sales and new store openings. Gross profit margin improved due to cost savings initiatives, and operating expenses were managed effectively, leading to a significant increase in operating profit. The company also strengthened its balance sheet by issuing new debt and continuing its share repurchase program, underscoring a commitment to shareholder value. Financially, AutoZone experienced positive operating cash flow, though it was lower than the prior year due to increased inventory investment and working capital needs. Investing activities saw higher capital expenditures related to store development. The company's liquidity remains strong, supported by revolving credit facilities and a favorable credit rating outlook, positioning it well for continued expansion and operational efficiency.

Key Highlights

  • 1Net sales increased by 3.6% to $1.12 billion for the twelve weeks ended February 15, 2003, with comparable store sales up 2.4%.
  • 2Operating profit rose significantly to $147.5 million (13.2% of net sales) from $121.1 million (11.2% of net sales) in the prior year's comparable period.
  • 3Gross profit margin improved to 44.3% from 43.9%, primarily due to cost savings initiatives.
  • 4Operating, selling, general, and administrative expenses decreased as a percentage of net sales to 31.1% from 32.7%.
  • 5The company issued $300 million of 5.875% Senior Notes due 2012, strengthening its long-term debt structure.
  • 6Capital expenditures increased to $61.8 million for store development, with plans to open at least 150 new domestic stores in fiscal year 2003.
  • 7AutoZone repurchased $306.9 million of common stock during the fiscal year to date, including shares under forward purchase contracts, demonstrating a commitment to returning capital to shareholders.

Frequently Asked Questions

AutoZone's net sales for the twelve weeks ended February 15, 2003, increased by 3.6% to $1.12 billion compared to the same period last year. This growth was driven by a 2.4% increase in comparable store sales, new store openings, and contributions from ALLDATA and Mexico operations.

Profitability improved significantly. Operating profit increased to $147.5 million for the quarter, up from $121.1 million in the prior year's comparable period. This was supported by an improved gross profit margin of 44.3% and a reduction in operating expenses as a percentage of sales to 31.1%.

AutoZone issued $300 million in Senior Notes and continues to utilize its revolving credit facilities. The company plans to fund its capital expenditures, working capital needs, and stock repurchases primarily through internally generated funds and supplemented by borrowings. Its credit ratings from Standard & Poor's and Moody's are stable to positive.

AutoZone is actively expanding its retail footprint. For the twenty-four weeks ended February 15, 2003, the company opened 61 net new domestic stores and 2 new stores in Mexico. They anticipate opening at least 150 new domestic stores during the fiscal year 2003.