AutoZone 3rd Quarter Total Company Same Store Sales Increase 0.9%; Domestic Same Store Sales were flat; EPS Increases to $36.69

Rhea-AI Summary

AutoZone (NYSE: AZO) reported its Q3 fiscal 2024 earnings, showing net sales of $4.2 billion, up 3.5% from last year. While total company same store sales increased by 0.9%, domestic same store sales remained flat. International same store sales saw significant growth at 18.1% (constant currency basis). The gross profit margin rose to 53.5%, bolstered by higher merchandise margins and a 15 basis point non-cash LIFO favorability. Operating expenses increased to 32.2% of sales, primarily due to higher store payroll costs. Operating profit grew by 4.9% to $900.2 million, with a net income of $651.7 million and a 7.5% increase in diluted EPS to $36.69. AutoZone repurchased 242,000 shares for $734.7 million. The company opened 45 new stores, bringing the total count to 7,236.

Positive

• Net sales increased by 3.5% to $4.2 billion.
• International same store sales grew by 18.1% on a constant currency basis.
• Gross profit margin increased to 53.5%, up by 102 basis points.
• Operating profit rose by 4.9% to $900.2 million.
• Net income for the quarter reached $651.7 million.
• Diluted EPS increased by 7.5% to $36.69.
• AutoZone repurchased 242,000 shares, totaling $734.7 million.
• The company opened 45 new stores, increasing the total store count to 7,236.

Negative

• Domestic same store sales were flat, showing no growth.
• Operating expenses rose to 32.2% of sales from 31.5% last year, driven by higher store payroll costs.

Insights

Financial Analyst

The third-quarter earnings report from AutoZone presents a mixed bag of results. While net sales increased by 3.5% to $4.2 billion, driven by strong international performance, domestic same-store sales remained flat. This stagnation domestically could raise concerns about the underlying health of their core market amidst economic uncertainty.

On the positive side, the company saw a 7.5% increase in earnings per share (EPS) to $36.69, largely due to higher merchandise margins and favorable non-cash LIFO adjustments. The gross profit margin also improved by 102 basis points to 53.5%, which indicates effective cost management and pricing strategies.

Despite these positive metrics, operating expenses increased to 32.2% of sales, up from 31.5% the previous year, primarily due to higher store payroll expenses. This increase in costs may pressure future profitability if sales growth does not accelerate.

The company's aggressive share repurchase program, with $734.7 million spent this quarter, highlights its commitment to returning value to shareholders but could also limit liquidity for other potential investments or debt reduction. With $1.4 billion remaining under the current repurchase authorization, this strategy appears to continue in the near term.

Overall, while the international growth and strong EPS gains are positives, flat domestic sales and rising operating expenses are potential red flags that investors should monitor closely.

Market Research Analyst

The disparity between AutoZone's domestic and international store performance is notable. International same-store sales rose by 18.1%, a significant increase compared to the flat domestic performance. This suggests that AutoZone's growth opportunities may lie more in expanding its international footprint rather than relying solely on domestic market improvements.

The flat domestic sales could be attributed to external factors such as the timing of tax refunds and cooler-than-usual weather, as mentioned by the CEO. However, these factors are typically short-term and may not indicate deeper market issues. Yet, investors should consider the possibility of market saturation in the U.S. and the increasing competition in the automotive parts retail sector.

Moving forward, the focus on enhancing inventory availability and accelerating the domestic commercial business could be vital strategies for reinvigorating domestic sales. However, these initiatives will need to yield results quickly to offset the rising operating expenses and maintain investor confidence.

Moreover, AutoZone's strategy of not engaging in automotive repair or installation services differentiates it from some competitors, which may limit its revenue streams but also reduces operational complexities and costs.

In summary, while the international growth prospects are encouraging, the company needs to address its domestic market challenges effectively to sustain overall growth.

MEMPHIS, Tenn., May 21, 2024 (GLOBE NEWSWIRE) -- AutoZone, Inc. (NYSE: AZO) today reported net sales of $4.2 billion for its third quarter (12 weeks) ended May 4, 2024, an increase of 3.5% from the third quarter of fiscal 2023 (12 weeks). Same store sales, or sales for our domestic and international stores open at least one year, are as follows:

				Constant Currency
	12 Weeks			12 Weeks*
Domestic	0.0	%		0.0	%
International	18.1	%		9.3	%
Total Company	1.9	%		0.9	%
* Excludes impacts from fluctuations of foreign exchange rates.

For the quarter, gross profit, as a percentage of sales, was 53.5%, an increase of 102 basis points versus the prior year. The increase in gross margin was primarily driven by higher merchandise margins and a 15 basis point ($7 million net) non-cash LIFO favorability. Operating expenses, as a percentage of sales, were 32.2% versus last year at 31.5%. Deleverage was driven primarily by higher store payroll as a percentage of sales versus the previous year.

Operating profit increased 4.9% to $900.2 million. Net income for the quarter was $651.7 million compared to $647.7 million in the same period last year, while diluted earnings per share increased 7.5% to $36.69.

Under its share repurchase program, AutoZone repurchased 242 thousand shares of its common stock at an average price per share of $3,036, for a total investment of $734.7 million. At the end of the third quarter, the Company had $1.4 billion remaining under its current share repurchase authorization.

“I want to thank and congratulate all AutoZoners for their efforts in delivering solid results for our third fiscal quarter. Our AutoZoners’ ongoing commitment to providing customers with Trustworthy Advice and WOW! Customer Service allowed us to deliver stronger than planned bottom line results. Domestically, our sales performance was negatively impacted at the start of the quarter due to the timing of tax refunds while the cooler than usual weather across several areas of the country negatively impacted our results later in the quarter. Conversely, we were pleased with the strong same store sales results we achieved in our international business. As we begin our all-important summer selling season, we are very excited about the initiatives we have in place to enhance our inventory availability, continue to accelerate our domestic Commercial business, and provide great customer service. As we continue to invest in our business, we remain committed to our disciplined approach of increasing operating earnings and cash flow, and delivering strong shareholder value,” said Phil Daniele, President and Chief Executive Officer.

During the quarter ended May 4, 2024, AutoZone opened 32 new stores in the U.S., 12 in Mexico and one in Brazil for a total of 45 net new stores. As of May 4, 2024, the Company had 6,364 stores in the U.S., 763 in Mexico and 109 in Brazil for a total store count of 7,236.

AutoZone is the leading retailer and distributor of automotive replacement parts and accessories in the Americas. Each store carries an extensive product line for cars, sport utility vehicles, vans and light duty trucks, including new and remanufactured automotive hard parts, maintenance items, accessories, and non-automotive products. The majority of stores have a commercial sales program that provides prompt delivery of parts and other products and commercial credit to local, regional and national repair garages, dealers, service stations, fleet owners and other accounts. AutoZone also sells automotive hard parts, maintenance items, accessories and non-automotive products through www.autozone.com, and our commercial customers can make purchases through www.autozonepro.com. Additionally, we sell the ALLDATA brand of automotive diagnostic, repair, collision and shop management software through www.alldata.com. We also provide product information on our Duralast branded products through www.duralastparts.com. AutoZone does not derive revenue from automotive repair or installation services.

AutoZone will host a conference call this morning, Tuesday, May 21, 2024, beginning at 10:00 a.m. (ET) to discuss its third quarter results. This call is being web cast and can be accessed, along with supporting slides, at AutoZone’s website at www.autozone.com by clicking on Investor Relations. Investors may also listen to the call by dialing (888) 506-0062, passcode AUTOZONE. In addition, a telephone replay will be available by dialing (877) 481-4010, replay passcode 50424 through June 4, 2024.

This release includes certain financial information not derived in accordance with generally accepted accounting principles (“GAAP”). These non-GAAP measures include adjustments to reflect return on invested capital, adjusted debt and adjusted debt to earnings before interest, taxes, depreciation, amortization, rent and share-based expense (“EBITDAR”). The Company believes that the presentation of these non-GAAP measures provides information that is useful to investors as it indicates more clearly the Company’s comparative year-to-year operating results, but this information should not be considered a substitute for any measures derived in accordance with GAAP. Management targets the Company’s capital structure in order to maintain its investment grade credit ratings. The Company believes this is important information for the management of its debt levels and share repurchases. We have included a reconciliation of this additional information to the most comparable GAAP measures in the accompanying reconciliation tables.

Certain statements contained herein constitute forward-looking statements that are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements typically use words such as “believe,” “anticipate,” “should,” “intend,” “plan,” “will,” “expect,” “estimate,” “project,” “positioned,” “strategy,” “seek,” “may,” “could” and similar expressions. These are based on assumptions and assessments made by our management in light of experience and perception of historical trends, current conditions, expected future developments and other factors that we believe to be appropriate. These forward-looking statements are subject to a number of risks and uncertainties, including without limitation: product demand, due to changes in fuel prices, miles driven or otherwise; energy prices; weather, including extreme temperatures, natural disasters and general weather conditions; competition; credit market conditions; cash flows; access to available and feasible financing on favorable terms; future stock repurchases; the impact of recessionary conditions; consumer debt levels; changes in laws or regulations; risks associated with self-insurance; war and the prospect of war, including terrorist activity; the impact of public health issues; inflation, including wage inflation; the ability to hire, train and retain qualified employees including members of management and other key personnel; construction delays; failure or interruption of our information technology systems; issues relating to the confidentiality, integrity or availability of information, including due to cyber-attacks; historic growth rate sustainability; downgrade of our credit ratings; damage to our reputation; challenges associated with doing business in and expanding into international markets; origin and raw material costs of suppliers; inventory availability; disruption in our supply chain; impact of tariffs; impact of new accounting standards; our ability to execute our growth initiatives; and other business interruptions. Certain of these risks and uncertainties are discussed in more detail in the “Risk Factors” section contained in Item 1A under Part 1 of the Company’s Annual Report on Form 10-K for the year ended August 26, 2023, and these Risk Factors should be read carefully. Forward-looking statements are not guarantees of future performance and actual results, developments and business decisions may differ from those contemplated by such forward-looking statements. Events described above and in the “Risk Factors” could materially and adversely affect our business. However, it should be understood that it is not possible to identify or predict all such risks and other factors that could affect these forward-looking statements. Forward-looking statements speak only as of the date made. Except as required by applicable law, we undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

Contact Information:
Financial: Brian Campbell at (901) 495-7005, brian.campbell@autozone.com
Media: David McKinney at (901) 495-7951, david.mckinney@autozone.com

AutoZone's 3rd Quarter Highlights - Fiscal 2024
Condensed Consolidated Statements of Operations
3rd Quarter, FY2024
(in thousands, except per share data)
			GAAP Results
			12 Weeks Ended				12 Weeks Ended
			May 4, 2024				May 6, 2023
Net sales			$	4,235,485			$	4,090,541
Cost of sales				1,969,963				1,944,415
Gross profit				2,265,522				2,146,126
Operating, SG&A expenses				1,365,341				1,287,645
Operating profit (EBIT)				900,181				858,481
Interest expense, net				104,422				74,313
Income before taxes				795,759				784,168
Income tax expense				144,033				136,445
Net income			$	651,726			$	647,723
Net income per share:
	Basic		$	37.73			$	35.22
	Diluted		$	36.69			$	34.12
Weighted average shares outstanding:
	Basic			17,273				18,389
	Diluted			17,761				18,983
Year-To-Date 3rd Quarter, FY2024
(in thousands, except per share data)
			GAAP Results
			36 Weeks Ended				36 Weeks Ended
			May 4, 2024				May 6, 2023
Net sales			$	12,284,888			$	11,766,591
Cost of sales				5,725,698				5,695,840
Gross profit				6,559,190				6,070,751
Operating, SG&A expenses				4,067,163				3,819,261
Operating profit (EBIT)				2,492,027				2,251,490
Interest expense, net				298,426				197,645
Income before taxes				2,193,601				2,053,845
Income taxes				433,382				390,260
Net income			$	1,760,219			$	1,663,585
Net income per share:
	Basic		$	100.96			$	88.96
	Diluted		$	98.11			$	86.10
Weighted average shares outstanding:
	Basic			17,434				18,700
	Diluted			17,941				19,322
Selected Balance Sheet Information
(in thousands)
			May 4, 2024				May 6, 2023				August 26, 2023
Cash and cash equivalents			$	275,358			$	274,916			$	277,054
Merchandise inventories				6,155,300				5,703,688				5,764,143
Current assets				7,289,452				6,708,872				6,779,426
Property and equipment, net				6,049,059				5,334,023				5,596,548
Operating lease right-of-use assets				3,097,047				2,959,488				2,998,097
Total assets				17,108,432				15,597,922				15,985,878
Accounts payable				7,369,673				7,215,566				7,201,281
Current portion of debt				500,000				-				-
Current liabilities				9,192,587				8,464,947				8,511,856
Operating lease liabilities, less current portion				2,963,026				2,862,152				2,917,046
Debt, less current portion				8,496,288				7,340,484				7,668,549
Stockholders' deficit				(4,838,237	)			(4,301,577	)			(4,349,894	)
Working capital				(1,903,135	)			(1,756,075	)			(1,732,430	)

AutoZone's 3rd Quarter Highlights - Fiscal 2024
Condensed Consolidated Statements of Operations
Adjusted Debt / EBITDAR
(in thousands, except adjusted debt to EBITDAR ratio)
			Trailing 4 Quarters
			May 4, 2024				May 6, 2023
Net income			$	2,625,060			$	2,473,628
Add: Interest expense				407,153				261,641
	Income tax expense			682,310				620,035
EBIT				3,714,523				3,355,304
Add: Depreciation and amortization				532,906				479,945
	Rent expense(1)			425,291				403,412
	Share-based expense			102,012				83,943
EBITDAR			$	4,774,732			$	4,322,604
Debt			$	8,996,288			$	7,340,484
Financing lease liabilities				344,966				284,896
Add: Rent x 6(1)				2,551,746				2,420,472
Adjusted debt			$	11,893,000			$	10,045,852
Adjusted debt to EBITDAR				2.5				2.3
Adjusted Return on Invested Capital (ROIC)
(in thousands, except ROIC)
			Trailing 4 Quarters
			May 4, 2024				May 6, 2023
Net income			$	2,625,060			$	2,473,628
Adjustments:
	Interest expense			407,153				261,641
	Rent expense(1)			425,291				403,412
	Tax effect(2)			(171,484	)			(133,010	)
Adjusted after-tax return			$	3,286,020			$	3,005,671
Average debt(3)			$	8,243,879			$	6,578,133
Average stockholders' deficit(3)				(4,708,140	)			(3,849,963	)
Add: Rent x 6(1)				2,551,746				2,420,472
Average financing lease liabilities(3)				306,316				296,772
Invested capital			$	6,393,801			$	5,445,414
Adjusted After-Tax ROIC				51.4	%			55.2	%
(1)The table below outlines the calculation of rent expense and reconciles rent expense to total lease cost, per ASC 842, the most directly comparable GAAP financial measure, for the trailing four quarters ended May 4, 2024 and May 6, 2023.
			Trailing 4 Quarters
(in thousands)			May 4, 2024				May 6, 2023
Total lease cost, per ASC 842			$	558,627			$	513,857
Less: Financing lease interest and amortization				(97,717	)			(81,871	)
Less: Variable operating lease components, related to insurance and common area maintenance				(35,619	)			(28,574	)
Rent expense			$	425,291			$	403,412
(2)Effective tax rate over the trailing four quarters ended May 4, 2024 and May 6, 2023 was 20.6% and 20.0%, respectively.
(3)All averages are computed based on trailing five quarter balances.
Other Selected Financial Information
(in thousands)
			May 4, 2024				May 6, 2023
Cumulative share repurchases ($ since fiscal 1998)			$	36,275,471			$	32,806,437
Remaining share repurchase authorization ($)				1,374,529				843,563
Cumulative share repurchases (shares since fiscal 1998)				154,938				153,629
Shares outstanding, end of quarter				17,144				18,225
			12 Weeks Ended				12 Weeks Ended				36 Weeks Ended				36 Weeks Ended
			May 4, 2024				May 6, 2023				May 4, 2024				May 6, 2023
Depreciation and amortization			$	129,224			$	116,123			$	374,416			$	339,087
Cash flow from operations				669,480				724,715				1,933,866				1,872,776
Capital spending				235,103				171,207				725,910				430,441

AutoZone's 3rd Quarter Highlights - Fiscal 2024
Condensed Consolidated Statements of Operations
Selected Operating Highlights
Store Count & Square Footage
			12 Weeks Ended					12 Weeks Ended					36 Weeks Ended					36 Weeks Ended
			May 4, 2024					May 6, 2023					May 4, 2024					May 6, 2023
Domestic:
	Beginning stores			6,332					6,226					6,300					6,168
	Stores opened			32					22					68					80
	Stores closed			-					-					(4	)				-
	Ending domestic stores			6,364					6,248					6,364					6,248
	Relocated stores			-					1					3					5
	Stores with commercial programs			5,843					5,526					5,843					5,526
	Square footage (in thousands)			42,078					41,253					42,078					41,253
Mexico:
	Beginning stores			751					707					740					703
	Stores opened			12					6					23					10
	Ending Mexico stores			763					713					763					713
Brazil:
	Beginning stores			108					81					100					72
	Stores opened			1					2					9					11
	Ending Brazil stores			109					83					109					83
Total				7,236					7,044					7,236					7,044
Total Company stores opened, net				45					30					96					101
	Square footage (in thousands)			48,567					47,191					48,567					47,191
	Square footage per store			6,712					6,699					6,712					6,699
Sales Statistics
($ in thousands, except sales per average square foot)
			12 Weeks Ended					12 Weeks Ended					Trailing 4 Quarters					Trailing 4 Quarters
Total AutoZone Stores (Domestic, Mexico and Brazil)			May 4, 2024					May 6, 2023					May 4, 2024					May 6, 2023
	Sales per average store		$	576				$	571				$	2,472				$	2,421
	Sales per average square foot		$	86				$	85				$	369				$	362
Auto Parts (Domestic, Mexico and Brazil)
	Total auto parts sales		$	4,156,411				$	4,016,692				$	17,647,873				$	16,811,885
	% Increase vs. LY			3.5	%				5.8	%				5.0	%				8.2	%
Domestic Commercial
	Total domestic commercial sales		$	1,147,113				$	1,110,476				$	4,719,208				$	4,541,729
	% Increase vs. LY			3.3	%				6.3	%				3.9	%				14.4	%
	Average sales per program per week		$	16.4				$	16.8				$	16.0				$	16.2
	% Increase vs. LY			(2.4	%)				1.2	%				(1.2	%)				10.2	%
All Other, including ALLDATA
	All other sales		$	79,074				$	73,849				$	327,633				$	303,061
	% Increase vs. LY			7.1	%				5.6	%				8.1	%				8.2	%
			12 Weeks Ended					12 Weeks Ended					36 Weeks Ended					36 Weeks Ended
Same store sales(4)			May 4, 2024					May 6, 2023					May 4, 2024					May 6, 2023
	Domestic			0.0	%				1.9	%				0.5	%				4.2	%
	International			18.1	%				26.8	%				22.2	%				26.6	%
	Total Company			1.9	%				4.0	%				2.7	%				6.1	%
	International - Constant Currency			9.3	%				14.7	%				10.2	%				18.5	%
	Total Company - Constant Currency			0.9	%				3.0	%				1.5	%				5.4	%
(4)Same store sales are based on sales for all stores open at least one year. Constant Currency same store sales exclude the impact of fluctuations of foreign currency exchange rates by converting both the current year and prior year international results at the prior year foreign currency exchange rate.
Inventory Statistics (Total Stores)
			as of					as of
			May 4, 2024					May 6, 2023
	Accounts payable/inventory			119.7	%				126.5	%
	($ in thousands)
	Inventory		$	6,155,300				$	5,703,688
	Inventory per store			851					810
	Net inventory (net of payables)			(1,214,373	)				(1,511,878	)
	Net inventory/per store			(168	)				(215	)
			Trailing 5 Quarters
			May 4, 2024					May 6, 2023
	Inventory turns			1.4		x			1.5		x

FAQ

What were AutoZone's net sales for Q3 fiscal 2024?

AutoZone reported net sales of $4.2 billion for Q3 fiscal 2024, an increase of 3.5% from the same period last year.

How did AutoZone's same store sales perform in Q3 fiscal 2024?

Total company same store sales increased by 0.9%, while domestic same store sales were flat, and international same store sales grew by 18.1% on a constant currency basis.

What was AutoZone's gross profit margin for Q3 fiscal 2024?

AutoZone's gross profit margin for Q3 fiscal 2024 increased to 53.5%, up by 102 basis points from the prior year.

What was AutoZone's operating profit for Q3 fiscal 2024?

Operating profit for AutoZone in Q3 fiscal 2024 was $900.2 million, a 4.9% increase from the previous year.

How much did AutoZone's diluted EPS increase in Q3 fiscal 2024?

AutoZone's diluted EPS increased by 7.5% to $36.69 in Q3 fiscal 2024.

What was the total value of shares repurchased by AutoZone in Q3 fiscal 2024?

AutoZone repurchased 242,000 shares at an average price of $3,036 per share, totaling $734.7 million in Q3 fiscal 2024.

How many new stores did AutoZone open in Q3 fiscal 2024?

AutoZone opened 45 new stores in Q3 fiscal 2024, bringing the total store count to 7,236.