10-QPeriod: Q2 FY2023

AUTOZONE INC Quarterly Report for Q2 Ended Feb 11, 2023

Filed March 17, 2023For Securities:AZO

Summary

AutoZone Inc. reported strong net sales growth of 9.5% for the twelve weeks ended February 11, 2023, reaching $3.7 billion. This growth was primarily driven by a 5.3% increase in domestic same-store sales and a significant 13.1% rise in domestic commercial sales, which now constitute approximately 29.5% of domestic auto parts sales. Despite a 1.0% increase in net income to $476.5 million, the company experienced a slight decrease in gross profit margin to 52.3% from 53.0% in the prior year, largely due to a non-cash LIFO charge of $10.0 million and increased supply chain costs. Operationally, the company demonstrated efficiency, with operating expenses as a percentage of sales slightly decreasing. Diluted earnings per share saw a healthy increase of 10.5% to $24.64. The company continues to focus on strategic investments, including expanding its supply chain infrastructure and opening new stores, while also actively returning capital to shareholders through its share repurchase program, with $1.8 billion remaining authorization.

Financial Highlights

45 data points
Beta

Revenue

$3.69B

52.3% Gross Margin

Net Income

$476.54M

12.9% Net Margin

EPS (Diluted)

$24.64

Total Assets

$15.55B

Cash & Equivalents

$301.29M

Free Cash Flow

$209.64M

Financial Statements
Beta
Revenue$3.69B
Cost of Revenue$1.76B
Gross Profit$1.93B
SG&A Expenses$1.26B
Operating Income$669.98M
Net Income$476.54M
EPS (Basic)$25.48
EPS (Diluted)$24.64
Shares Outstanding (Basic)18.70M
Shares Outstanding (Diluted)19.34M

Key Highlights

  • 1Net sales increased by 9.5% to $3.7 billion for the twelve weeks ended February 11, 2023.
  • 2Domestic same-store sales grew by 5.3%, indicating continued strength in core operations.
  • 3Domestic commercial sales showed robust growth, up 13.1%, highlighting the success of the B2B strategy.
  • 4Diluted earnings per share increased by 10.5% to $24.64, demonstrating improved profitability on a per-share basis.
  • 5The company reported a non-cash LIFO charge of $10.0 million, impacting gross margin, which decreased to 52.3%.
  • 6Significant capital allocation continues, with $1.8 billion remaining under the share repurchase program authorization.
  • 7Investments in growth initiatives, including supply chain expansion and new store openings, are increasing.

Frequently Asked Questions

Sales growth was primarily driven by a 5.3% increase in domestic same-store sales and a strong 13.1% increase in domestic commercial sales. This indicates that both retail and business-to-business segments are performing well.

The company recorded a $10.0 million non-cash LIFO charge for the quarter. This charge, along with supply chain costs and accelerated growth in the commercial business, contributed to a decrease in the gross profit margin to 52.3% from 53.0% in the prior year. Excluding this charge, adjusted diluted earnings per share increased by 12.3%.

AutoZone continues to invest in growth initiatives, such as supply chain expansion and new stores. Simultaneously, the company is actively repurchasing its own shares, with $1.8 billion remaining under its authorization, signaling a commitment to returning capital to shareholders.

Management highlights several factors including miles driven, the age of the vehicle fleet, inflation, fuel costs, wage rates, supply chain disruptions, and hiring conditions. The increasing average age of vehicles on the road remains a favorable long-term trend for the industry.