10-QPeriod: Q1 FY2014

AUTOZONE INC Quarterly Report for Q1 Ended Nov 23, 2013

Filed December 18, 2013For Securities:AZO

Summary

AutoZone Inc. (AZO) reported its third-quarter results for the period ending November 23, 2013, demonstrating solid top-line growth and improved profitability. Net sales increased by 5.1% year-over-year to $2.09 billion, driven by new store openings, expansion of commercial programs, and contributions from AutoAnything. Domestic same-store sales also saw a modest increase of 0.9%. The company reported a significant 16.2% increase in diluted earnings per share (EPS) to $6.29, up from $5.41 in the prior year's comparable period. This earnings growth was supported by an increase in gross profit margin to 51.9% and improved operating efficiency, with operating expenses as a percentage of sales slightly decreasing. Despite an increase in average borrowings, net interest expense saw only a marginal rise due to lower borrowing rates. AutoZone's strong operating cash flow generation of $357.3 million underscores its robust financial health.

Financial Highlights

48 data points
Beta

Revenue

$2.09B

51.9% Gross Margin

Net Income

$218.09M

10.4% Net Margin

EPS (Diluted)

$6.29

Total Assets

$7.02B

Cash & Equivalents

$125.85M

Free Cash Flow

$274.74M

Financial Statements
Beta
Revenue$2.09B
Cost of Revenue$1.01B
Gross Profit$1.09B
SG&A Expenses$701.97M
Operating Income$383.73M
Net Income$218.09M
EPS (Basic)$6.39
EPS (Diluted)$6.29
Shares Outstanding (Basic)34.11M
Shares Outstanding (Diluted)34.68M

Key Highlights

  • 1Net sales increased 5.1% to $2.09 billion, driven by new stores and commercial program growth.
  • 2Diluted Earnings Per Share (EPS) rose significantly by 16.2% to $6.29.
  • 3Gross profit margin improved slightly to 51.9% due to lower acquisition costs.
  • 4Operating expenses as a percentage of sales decreased to 33.5%, reflecting improved efficiency.
  • 5Operating cash flow remained strong, generating $357.3 million.
  • 6The company continued its aggressive share repurchase program, buying back $291.5 million in common stock during the quarter.
  • 7The Board of Directors increased the share repurchase authorization by $750 million, indicating continued commitment to returning capital to shareholders.

Frequently Asked Questions

The primary drivers of AutoZone's 5.1% net sales increase were new store openings, an expanded commercial sales program, and growth in AutoAnything sales. Domestic same-store sales also contributed with a 0.9% increase.

Profitability saw a significant improvement, with diluted earnings per share (EPS) increasing by 16.2% to $6.29 from $5.41 in the comparable prior year period. This was supported by a slight increase in gross margin and better operating expense management as a percentage of sales.

AutoZone demonstrates a strong commitment to returning capital through its share repurchase program. The company repurchased $291.5 million of its common stock during the quarter and subsequently received Board authorization to increase the cumulative repurchase program by an additional $750 million, showing ongoing confidence in its financial position and shareholder value creation.

Management notes that while AutoZone is well-positioned, its outlook is influenced by macroeconomic factors such as consumer cash flow challenges due to high unemployment, unpredictable gasoline prices, and the impact of increased payroll taxes. The company also closely monitors vehicle age and miles driven as long-term indicators for its industry.