10-QPeriod: Q3 FY2016

AUTOZONE INC Quarterly Report for Q3 Ended May 7, 2016

Filed June 15, 2016For Securities:AZO

Summary

AutoZone Inc. (AZO) reported strong performance for the quarter ending May 7, 2016. Net sales increased by 4.0% to $2.59 billion, driven by a 2.0% same-store sales growth and contributions from new stores. Diluted earnings per share saw a significant increase of 12.6% to $10.77. This growth was supported by a 52.8% gross profit margin, a slight improvement from the prior year, and effective management of operating expenses. The company's financial health remains robust, with operating cash flows providing $1.05 billion for the year-to-date period. AutoZone continues to actively return capital to shareholders through its substantial share repurchase program, repurchasing $1.08 billion in the year-to-date period and maintaining a remaining authorization of $765.1 million. The company also continues its strategic initiatives, including the rollout of more frequent deliveries and its mega hub strategy, aimed at enhancing inventory availability and operational efficiency.

Financial Statements
Beta

Key Highlights

  • 1Net sales grew 4.0% year-over-year to $2.59 billion for the twelve weeks ended May 7, 2016.
  • 2Domestic same-store sales increased by 2.0%.
  • 3Diluted earnings per share (EPS) rose 12.6% to $10.77 from $9.57 in the prior year period.
  • 4Gross profit margin improved to 52.8% from 52.3% year-over-year.
  • 5Operating cash flow for the thirty-six weeks ended May 7, 2016 was $1.05 billion, an increase from the prior year.
  • 6The company repurchased $1.08 billion of its common stock during the thirty-six week period.
  • 7AutoZone ended the quarter with $213.4 million in cash and cash equivalents.

Frequently Asked Questions

The primary driver of AutoZone's sales growth was a combination of domestic same-store sales increase of 2.0% and net sales of $42.7 million generated from new store openings.

AutoZone is implementing strategic initiatives to increase inventory availability, including more frequent deliveries to domestic stores and expanding its 'mega hub' strategy. While these initiatives led to higher supply chain costs (impacting gross margin by 19 basis points for the quarter), the company continues to focus on optimizing inventory management.

AutoZone actively returns capital to shareholders through its significant share repurchase program. In the year-to-date period, the company repurchased $1.08 billion of stock and had $765.1 million remaining under its authorization. The company also indicated plans to invest in new locations, supply chain infrastructure, and technology.

Management noted that lower gas prices provided consumers with additional disposable income, potentially benefiting sales. The timing of income tax refunds also remained comparable to the prior year, continuing to support vehicle repairs and enhancements among economically challenged customers.