10-QPeriod: Q3 FY2019

AUTOZONE INC Quarterly Report for Q3 Ended May 4, 2019

Filed June 7, 2019For Securities:AZO

Summary

AutoZone Inc. (AZO) reported solid financial results for the third quarter of fiscal year 2019, ending May 4, 2019. Net sales increased by 4.6% to $2.783 billion, driven by a 3.9% rise in domestic same-store sales and contributions from new store openings. Net income saw a significant increase of 10.7% to $405.9 million, translating to a diluted Earnings Per Share (EPS) of $15.99, up 19.2% from the prior year quarter. This growth was supported by a lower effective income tax rate and robust share repurchase activity. The company's operational performance remained strong, with failure and maintenance-related categories constituting approximately 84% of sales, indicating consistent demand for essential automotive parts. The average age of vehicles on the road continues to trend favorably, exceeding 11 years, which bodes well for future demand. AutoZone also demonstrated effective capital allocation, with a strong return on invested capital (ROIC) of 34.5% and substantial ongoing share repurchase programs, highlighting a commitment to returning value to shareholders.

Financial Highlights

47 data points
Beta

Revenue

$2.78B

53.6% Gross Margin

Net Income

$405.95M

14.6% Net Margin

EPS (Diluted)

$15.99

Total Assets

$9.77B

Cash & Equivalents

$174.06M

Free Cash Flow

$351.55M

Financial Statements
Beta
Revenue$2.78B
Cost of Revenue$1.29B
Gross Profit$1.49B
SG&A Expenses$944.50M
Operating Income$547.52M
Net Income$405.95M
EPS (Basic)$16.35
EPS (Diluted)$15.99
Shares Outstanding (Basic)24.84M
Shares Outstanding (Diluted)25.39M

Key Highlights

  • 1Net sales increased 4.6% year-over-year to $2.783 billion for the twelve weeks ended May 4, 2019.
  • 2Domestic same-store sales grew by 3.9%, indicating continued demand for AutoZone's products.
  • 3Net income rose by 10.7% to $405.9 million, with diluted EPS increasing 19.2% to $15.99.
  • 4The effective income tax rate decreased, contributing positively to net income.
  • 5Operating cash flow remained strong, generating $1.287 billion for the thirty-six weeks ended May 4, 2019.
  • 6The company continued its aggressive share repurchase program, buying back $1.313 billion in the thirty-six week period.
  • 7The average age of vehicles on the road remains above 11 years, a positive long-term indicator for the industry.

Frequently Asked Questions

Sales growth was primarily driven by a 3.9% increase in domestic same-store sales and revenue from new domestic store openings. Domestic commercial sales also showed significant growth, increasing by 14.9%.

Profitability improved significantly. Net income increased by 10.7% to $405.9 million, and diluted EPS grew by 19.2% to $15.99. This was aided by a lower effective income tax rate and strong operational execution.

AutoZone remains committed to returning capital to shareholders through an active share repurchase program. The company repurchased $1.313 billion of its common stock during the thirty-six week period and had $1.169 billion remaining under its authorization as of May 4, 2019. This, combined with a strong adjusted ROIC of 34.5%, indicates effective capital management.

The filing mentions various risks including product demand, energy prices, competition, credit market conditions, economic downturns, and cyber security. However, the company states it was in compliance with all debt covenants and does not believe current legal proceedings will have a material adverse effect on its financial position.