10-QPeriod: Q1 FY2019

AUTOZONE INC Quarterly Report for Q1 Ended Nov 17, 2018

Filed December 18, 2018For Securities:AZO

Summary

AutoZone Inc. (AZO) reported net sales of $2.64 billion for the twelve weeks ended November 17, 2018, a 2.0% increase compared to the same period last year. This growth was primarily driven by new domestic store openings and an increase in domestic commercial sales. Diluted Earnings Per Share (EPS) saw a significant increase of 34.7% to $13.47, largely benefiting from a lower effective income tax rate resulting from the Tax Cuts and Jobs Act of 2017. The company's gross profit margin improved to 53.7% of net sales, up from 52.8% in the prior year, attributed to higher merchandise margins and the impact of prior-year business divestitures. However, operating expenses as a percentage of sales increased due to higher domestic store payroll costs. The company maintained a strong liquidity position, with operating cash flows of $449.2 million. AutoZone also continued its aggressive share repurchase program, returning significant capital to shareholders.

Financial Highlights

46 data points
Beta

Revenue

$2.64B

53.7% Gross Margin

Net Income

$351.41M

13.3% Net Margin

EPS (Diluted)

$13.47

Total Assets

$9.52B

Cash & Equivalents

$252.09M

Free Cash Flow

$351.01M

Financial Statements
Beta
Revenue$2.64B
Cost of Revenue$1.22B
Gross Profit$1.42B
SG&A Expenses$929.66M
Operating Income$487.82M
Net Income$351.41M
EPS (Basic)$13.71
EPS (Diluted)$13.47
Shares Outstanding (Basic)25.63M
Shares Outstanding (Diluted)26.10M

Key Highlights

  • 1Net sales increased by 2.0% to $2.64 billion for the twelve weeks ended November 17, 2018, compared to the prior year period.
  • 2Diluted Earnings Per Share (EPS) rose by 34.7% to $13.47, significantly boosted by a lower effective tax rate due to Tax Reform.
  • 3Gross profit margin improved to 53.7% of net sales, up from 52.8% in the prior year, driven by higher merchandise margins and prior year divestitures.
  • 4Operating expenses as a percentage of sales increased, primarily due to higher domestic store payroll costs.
  • 5Net cash provided by operating activities was $449.2 million, though lower than the prior year's $565.0 million, mainly due to the timing of accrued payments.
  • 6The company repurchased $497.1 million of its common stock during the quarter, with $984.6 million remaining under its authorized repurchase program.
  • 7The average age of vehicles on the road continues to exceed 11 years, supporting long-term demand for automotive replacement parts.

Frequently Asked Questions

The significant increase in AutoZone's diluted Earnings Per Share (EPS) was primarily driven by a lower effective income tax rate. This reduction in the tax rate is a direct benefit from the Tax Cuts and Jobs Act of 2017, which lowered the U.S. federal corporate tax rate.

AutoZone's gross profit margin improved to 53.7% of net sales for the twelve weeks ended November 17, 2018, up from 52.8% in the prior year period. This improvement was primarily attributable to higher merchandise margins and the impact of the sale of two businesses in the prior year.

AutoZone expects to increase investments in its business in fiscal 2019 compared to fiscal 2018, focusing on new stores, supply chain infrastructure, store enhancements, and technology. The company plans to primarily use internally generated funds and available borrowing capacity for these investments, working capital needs, and stock repurchases, with potential for new borrowings if needed.

The average age of vehicles on the road continues to increase, exceeding 11 years. This trend is viewed positively by AutoZone as older vehicles typically require more maintenance and replacement parts, which directly benefits the company's sales and market growth over the long term.