10-QPeriod: Q1 FY2017

AUTOZONE INC Quarterly Report for Q1 Ended Nov 19, 2016

Filed December 14, 2016For Securities:AZO

Summary

AutoZone, Inc. reported solid financial performance for the twelve weeks ended November 19, 2016. Net sales increased by 3.4% to $2.47 billion, driven by new store openings and a 1.6% growth in same-store sales. Diluted earnings per share saw a significant increase of 13.0% to $9.36, reflecting both sales growth and operational efficiencies. The company demonstrated strong operating cash flow generation, with a notable increase of $59.5 million compared to the prior year's period. This robust performance was supported by effective inventory management and continued strategic initiatives aimed at enhancing inventory availability and assortment. AutoZone also continued its aggressive share repurchase program, demonstrating a commitment to returning capital to shareholders.

Financial Highlights

46 data points
Beta

Revenue

$2.47B

52.7% Gross Margin

Net Income

$278.13M

11.3% Net Margin

EPS (Diluted)

$9.36

Total Assets

$8.74B

Cash & Equivalents

$195.54M

Free Cash Flow

$308.58M

Financial Statements
Beta
Revenue$2.47B
Cost of Revenue$1.17B
Gross Profit$1.30B
SG&A Expenses$842.64M
Operating Income$458.90M
Net Income$278.13M
EPS (Basic)$9.61
EPS (Diluted)$9.36
Shares Outstanding (Basic)28.95M
Shares Outstanding (Diluted)29.70M

Key Highlights

  • 1Net sales increased by 3.4% to $2.47 billion, driven by new store openings and same-store sales growth of 1.6%.
  • 2Diluted earnings per share (EPS) rose by 13.0% to $9.36 from $8.29 in the prior year's comparable period.
  • 3Operating cash flow improved significantly, increasing by $59.5 million to $406.5 million.
  • 4Gross profit margin improved slightly to 52.7% from 52.5% due to lower acquisition costs.
  • 5The company repurchased $362.6 million of common stock during the quarter, underscoring its commitment to capital return.
  • 6Total debt remained substantial at $4.997 billion, though liquidity was supported by significant availability under revolving credit facilities.
  • 7The company continued to invest in its infrastructure, with capital expenditures of $97.9 million, including new distribution centers and store openings.

Frequently Asked Questions

Sales growth was primarily driven by net sales of $40.3 million from new domestic AutoZone stores and a 1.6% increase in domestic same-store sales. Commercial sales also contributed with an increase of $27.3 million.

The adoption of ASU 2016-09 for share-based payments positively impacted earnings per share by $0.03. This was primarily due to a lower effective tax rate (a benefit of $0.11 per share), partially offset by a change in the diluted outstanding shares calculation (a reduction of $0.08 per share).

AutoZone is implementing strategic initiatives to increase inventory availability in domestic stores. This includes testing increased delivery frequency from distribution centers and expanding product assortments in select 'mega hub' stores. These efforts are expected to continue throughout fiscal 2017.

AutoZone maintains a significant amount of debt but also has substantial availability under its revolving credit facilities ($1.958 billion as of November 19, 2016). The company continues to focus on strong operating cash flow, strategic capital expenditures, and share repurchases, while managing its debt levels to maintain investment-grade credit ratings.