10-QPeriod: Q3 FY2015

AUTOZONE INC Quarterly Report for Q3 Ended May 9, 2015

Filed June 17, 2015For Securities:AZO

Summary

AutoZone reported solid financial results for the fiscal third quarter ending May 9, 2015, with net sales increasing by 6.5% to $2.49 billion and diluted earnings per share (EPS) growing by 13.1% to $9.57. This growth was driven by a 2.3% increase in domestic same-store sales, contributions from new store openings, and the recent acquisition of IMC. The company maintained strong gross margins at 52.3% and demonstrated effective cost management, with operating expenses as a percentage of sales remaining stable. AutoZone also continued its aggressive share repurchase program, further boosting EPS. The company's financial position remains robust, supported by strong operating cash flows and significant availability under its credit facilities, positioning it well for continued growth and shareholder returns.

Financial Highlights

48 data points
Beta

Revenue

$2.49B

52.3% Gross Margin

Net Income

$309.07M

12.4% Net Margin

EPS (Diluted)

$9.57

Total Assets

$8.03B

Cash & Equivalents

$153.29M

Free Cash Flow

$416.00M

Financial Statements
Beta
Revenue$2.49B
Cost of Revenue$1.19B
Gross Profit$1.30B
SG&A Expenses$788.84M
Operating Income$513.95M
Net Income$309.07M
EPS (Basic)$9.77
EPS (Diluted)$9.57
Shares Outstanding (Basic)31.64M
Shares Outstanding (Diluted)32.30M

Key Highlights

  • 1Net sales increased by 6.5% to $2.49 billion for the twelve weeks ended May 9, 2015, compared to $2.34 billion in the prior year period.
  • 2Diluted earnings per share (EPS) rose by 13.1% to $9.57 for the twelve weeks ended May 9, 2015, from $8.46 in the prior year period.
  • 3Domestic same-store sales grew by 2.3%, indicating continued customer demand.
  • 4Gross profit margin improved slightly to 52.3% from 52.0% in the prior year period.
  • 5The company acquired Interamerican Motor Corporation (IMC) for $75.7 million, expecting to expand its share in the import replacement parts market.
  • 6AutoZone repurchased approximately $840.9 million of its common stock during the thirty-six week period ended May 9, 2015.
  • 7Operating cash flow remained strong at $999.1 million for the first thirty-six weeks of the fiscal year.

Frequently Asked Questions

The acquisition of Interamerican Motor Corporation (IMC) contributed $47.9 million in net sales during the third quarter and $126.1 million for the first thirty-six weeks of the fiscal year. While contributing to sales growth, it also had a slight negative impact on gross margin (26 basis points for the quarter) and operating expenses as a percentage of sales due to integration costs and IMC's operational profile. However, management expects IMC to help grow AutoZone's share in the aftermarket import car parts market.

AutoZone maintains a strong liquidity position with $1.711 billion in availability under its revolving credit facilities as of May 9, 2015. The company actively manages its debt structure, issuing new notes and utilizing commercial paper. For the thirty-six weeks ended May 9, 2015, AutoZone issued $648.8 million in new debt and repaid $500 million of existing notes. The company's adjusted debt to EBITDAR ratio remained stable at 2.5x, indicating a consistent leverage profile and management's focus on maintaining investment-grade credit ratings.

AutoZone's sales growth is primarily driven by a combination of factors: (1) positive same-store sales growth, which was 2.3% domestically in the third quarter, indicating healthy demand at existing locations; (2) contributions from new store openings, with 104 net new locations opened in the first thirty-six weeks of the fiscal year; and (3) strategic acquisitions, such as IMC, which expand market reach and product offerings. The company also noted that failure and maintenance-related categories represented the largest portion of its sales mix.

AutoZone continues its aggressive share repurchase program, having repurchased $840.9 million of its common stock in the first thirty-six weeks of the fiscal year, with an additional $778.3 million remaining under its authorization as of May 9, 2015. These repurchases reduce the number of outstanding shares, thereby increasing earnings per share (EPS) and potentially enhancing shareholder value. The report noted that stock repurchases added $0.36 to diluted EPS in the third quarter and $0.90 year-to-date.