How did AutoZone perform in the first quarter of fiscal 2025?

Net sales grew 2.1% to $4.28 billion and total company constant currency same store sales rose 1.8%. Operating profit fell 0.9% to $841.1 million and diluted EPS was $32.52, nearly flat versus $32.55 last year, as higher operating expenses and interest costs offset gross margin gains.

Why did EPS remain roughly flat despite a decline in net income?

Net income fell about 4.8% to $564.9 million, but the diluted share count dropped from 18.23 million to 17.37 million, roughly 4.7% fewer shares. Share repurchases offset the earnings decline on a per-share basis.

What is driving the gap between domestic and international results?

Domestic same store sales grew only 0.3%, with DIY trends improving in ticket and traffic and commercial sales up 3.2%. International same store sales rose 13.7% in constant currency, reflecting strong performance in Mexico and Brazil, though reported international growth was only 1.0% due to currency headwinds.

Are there concerns about inventory and cash generation?

Inventory increased 8.7% year over year to $6.27 billion, which is faster than sales growth, and operating cash flow declined to $811.8 million from $830.3 million. Accounts payable still exceeds inventory, keeping net inventory negative, but investors may watch whether inventory growth moderates.

What does the company's capital structure and return profile look like?

Adjusted debt to EBITDAR was steady at 2.5x, consistent with the company's target to maintain investment grade ratings. The company has $1.7 billion left under its buyback authorization, but adjusted after-tax ROIC declined to 47.7% from 55.0%, and the stockholders' deficit remains at $(4.67) billion.

AZO 8-K: Earnings & Results

01—Abstract

Summary

Summary of the 8-K filed December 10, 2024. Cited figures are marked; the original filing is the authoritative source.

AutoZone (AZO) reported first-quarter fiscal 2025 results for the 12 weeks ended November 23, 2024, with net sales of $4.28 billion^a, up 2.1% year over year.

Total company same store sales rose 1.8% on a constant currency basis (0.4% as reported), with domestic same store sales up just 0.3% and international same store sales up 13.7% in constant currency. Gross margin expanded 16 basis points to 53.0% on higher merchandise margins, but operating expenses rose to 33.3% of sales from 32.6%, so operating profit fell 0.9% to $841.1 million^b. Diluted EPS was $32.52 versus $32.55 a year earlier, helped by a 4.7% reduction in diluted share count (17.37 million vs. 18.23 million), while net income declined to $564.9 million from $593.5 million, and interest expense rose to $107.6 million from $91.4 million.

The quarter's core domestic business showed only modest momentum. Management highlighted improving DIY average ticket and traffic trends, domestic commercial sales growth of 3.2%, and encouraging trends at quarter end, but domestic comps were flat at +0.3%. Inventory grew 8.7% year over year to $6.27 billion^c, outpacing sales growth, while the company continued to operate with negative net inventory of -$166 thousand per store.

Capital returns remained significant: AutoZone repurchased $505.2 million^d of stock in the quarter and has $1.7 billion remaining under its current authorization. Operating cash flow was $811.8 million versus $830.3 million last year, and capital spending rose to $247.0 million. Balance sheet metrics were stable: adjusted debt to EBITDAR held at 2.5x and adjusted after-tax ROIC was 47.7%, down from 55.0% a year earlier.

Store growth continued with 34 net new stores in the quarter, bringing the total to 7,387 across the U.S., Mexico and Brazil. The stockholders' deficit narrowed to $(4.67) billion, consistent with the company's leveraged recapitalization-style capital structure built through buybacks. Investors will likely focus on whether domestic comps can accelerate from the flat trend and whether margin pressure from rising operating expenses and interest costs can be contained.

02—Key points

Key Highlights

Net sales of $4.28 billion, up 2.1% year over year, with total company constant currency same store sales up 1.8%.
Domestic same store sales increased only 0.3%, while international same store sales rose 13.7% in constant currency, driving the total company result.
Gross margin rose 16 basis points to 53.0% on higher merchandise margins, but operating expenses increased to 33.3% of sales from 32.6%.
Operating profit declined 0.9% to $841.1 million; diluted EPS was $32.52 versus $32.55, with net income down to $564.9 million from $593.5 million.
Interest expense, net increased to $107.6 million from $91.4 million, a meaningful headwind to pre-tax income.
Repurchased $505.2 million of stock in the quarter with $1.7 billion remaining under authorization; diluted share count fell about 4.7% year over year.
Inventory rose 8.7% to $6.27 billion, and adjusted after-tax ROIC declined to 47.7% from 55.0%.

03—Questions

Frequently Asked Questions

How did AutoZone perform in the first quarter of fiscal 2025?
Net sales grew 2.1% to $4.28 billion and total company constant currency same store sales rose 1.8%. Operating profit fell 0.9% to $841.1 million and diluted EPS was $32.52, nearly flat versus $32.55 last year, as higher operating expenses and interest costs offset gross margin gains.
Why did EPS remain roughly flat despite a decline in net income?
Net income fell about 4.8% to $564.9 million, but the diluted share count dropped from 18.23 million to 17.37 million, roughly 4.7% fewer shares. Share repurchases offset the earnings decline on a per-share basis.
What is driving the gap between domestic and international results?
Domestic same store sales grew only 0.3%, with DIY trends improving in ticket and traffic and commercial sales up 3.2%. International same store sales rose 13.7% in constant currency, reflecting strong performance in Mexico and Brazil, though reported international growth was only 1.0% due to currency headwinds.
Are there concerns about inventory and cash generation?
Inventory increased 8.7% year over year to $6.27 billion, which is faster than sales growth, and operating cash flow declined to $811.8 million from $830.3 million. Accounts payable still exceeds inventory, keeping net inventory negative, but investors may watch whether inventory growth moderates.
What does the company's capital structure and return profile look like?
Adjusted debt to EBITDAR was steady at 2.5x, consistent with the company's target to maintain investment grade ratings. The company has $1.7 billion left under its buyback authorization, but adjusted after-tax ROIC declined to 47.7% from 55.0%, and the stockholders' deficit remains at $(4.67) billion.

04—Continue

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