10-QPeriod: Q1 FY2011

AUTOZONE INC Quarterly Report for Q1 Ended Nov 20, 2010

Filed December 16, 2010For Securities:AZO

Summary

AutoZone Inc. reported strong financial results for the twelve weeks ended November 20, 2010. Net sales increased by 12.7% year-over-year to $1.79 billion, driven by a robust 9.5% increase in domestic same-store sales across both retail and commercial segments. This sales growth, partly attributed to challenging macroeconomic conditions, translated into a significant 33.7% rise in diluted earnings per share to $3.77. The company demonstrated improved operational efficiency, with gross profit margin increasing to 50.7% and operating expenses as a percentage of sales decreasing due to sales leverage. Despite a slight increase in net interest expense, AutoZone managed its capital effectively, generating substantial cash flow from operations. The company also continued its active share repurchase program, underscoring its commitment to returning value to shareholders.

Financial Highlights

47 data points
Beta

Revenue

$1.79B

50.7% Gross Margin

Net Income

$172.08M

9.6% Net Margin

EPS (Diluted)

$3.77

Total Assets

$5.64B

Cash & Equivalents

$98.01M

Free Cash Flow

$311.54M

Financial Statements
Beta
Revenue$1.79B
Cost of Revenue$883.91M
Gross Profit$907.75M
SG&A Expenses$601.63M
Operating Expenses$601.63M
Operating Income$306.12M
Net Income$172.08M
EPS (Basic)$3.85
EPS (Diluted)$3.77
Shares Outstanding (Basic)44.67M
Shares Outstanding (Diluted)45.63M

Key Highlights

  • 1Net sales increased 12.7% to $1.79 billion.
  • 2Domestic same-store sales grew by 9.5%, indicating strong underlying business performance.
  • 3Diluted earnings per share (EPS) surged by 33.7% to $3.77.
  • 4Gross profit margin improved to 50.7% from 50.3% in the prior year period.
  • 5Operating expenses as a percentage of sales decreased to 33.6% due to sales leverage.
  • 6Net cash provided by operating activities significantly increased to $357.4 million.
  • 7The company continued its substantial share repurchase program, buying back $299.7 million in stock during the quarter.

Frequently Asked Questions

AutoZone's sales were driven by a combination of factors, including a strong 9.5% increase in domestic same-store sales across both retail and commercial customers. The company also noted that challenging macroeconomic conditions, such as higher unemployment, likely aided sales growth. The average age of vehicles on the road, which is trending favorably for the industry, also contributed to demand.

Profitability was enhanced through several avenues. The gross profit margin increased to 50.7% due to higher penetration of Duralast products and lower product acquisition costs. Operating expenses as a percentage of sales decreased to 33.6% as the company leveraged its store operating expenses against higher sales, partially offset by investments in initiatives like the hub store program and increased legal expenses.

AutoZone generated strong operating cash flows of $357.4 million, which were used to fund investments in the business, including new store openings, and to execute its share repurchase program. The company repurchased $299.7 million of its stock during the quarter and has an ongoing authorization for further repurchases. This active approach to capital allocation demonstrates a commitment to enhancing shareholder value.

The company is a defendant in a lawsuit regarding alleged violations of the Robinson-Patman Act. While the court previously dismissed claims against AutoZone, plaintiffs have filed a motion for leave to amend their complaint. AutoZone believes the suit is without merit and is vigorously defending itself, but is unable to estimate a loss or range of loss. The company is also involved in other minor legal proceedings that are not expected to be material in aggregate.