AZO
$633.70
Autozone
($3.29)
(.52%)
Earnings Details
3rd Quarter May 2018
Tuesday, May 22, 2018 6:59:00 AM
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Summary

Autozone Beats

Autozone (AZO) reported 3rd Quarter May 2018 earnings of $13.42 per share on revenue of $2.7 billion. The consensus earnings estimate was $12.99 per share on revenue of $2.7 billion. The Earnings Whisper number was $13.15 per share. Revenue grew 1.6% on a year-over-year basis.

AutoZone Inc is a retailer and distributor of automotive replacement parts and accessories in the United States. The Company operates stores which carries an extensive product line for cars, sport utility vehicles, vans and light trucks and among others.

Results
Reported Earnings
$13.42
Earnings Whisper
$13.15
Consensus Estimate
$12.99
Reported Revenue
$2.66 Bil
Revenue Estimate
$2.71 Bil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

AutoZone 3rd Quarter Same Store Sales Increase 0.6%; EPS Increases 17.3% to $13.42

MEMPHIS, Tenn., May 22, 2018 (GLOBE NEWSWIRE) -- AutoZone, Inc. (NYSE:AZO) today reported net sales of $2.7 billion for its third quarter (12 weeks) ended May 5, 2018, an increase of 1.6% from the third quarter of fiscal 2017 (12 weeks).  Domestic same store sales, or sales for stores open at least one year, increased 0.6% for the quarter.

Net income for the quarter increased 10.6% over the same period last year to $366.7 million, while diluted earnings per share increased 17.3% to $13.42 per share from $11.44 per share in the year-ago quarter.  Net income and diluted earnings per share benefitted from a lower effective income tax rate, primarily due to the recent tax reform. 

For the quarter, gross profit, as a percentage of sales, was 53.5% (versus 52.6% for the same period last year).  The increase in gross margin was attributable to higher merchandise margins and the favorable comparison from the impact of the previously announced sale of two business units completed during the quarter (40 bps).  Operating expenses, as a percentage of sales, were 33.0% (versus 32.4% the same period last year), with deleverage driven by occupancy costs (27 bps) and increased store payroll.

Under its share repurchase program, AutoZone repurchased 599 thousand shares of its common stock for $400 million during the third quarter, at an average price of $667 per share.  Year-to-date, the Company had repurchased 1.4 million of its common shares for $927 million, at an average price of $651 per share.  At the end of the third quarter, the Company had $897 million remaining under its current share repurchase authorization. 

The Company’s inventory increased 3.7% over the same period last year, driven by new stores and increased product placement, partially offset by the impact of the sale of two business units.  Inventory per location was $658 thousand versus $653 thousand last year and $671 thousand last quarter.  Net inventory, defined as merchandise inventories less accounts payable, on a per location basis, was a negative $48 thousand versus negative $47 thousand last year and negative $46 thousand last quarter.

“I would like to thank our entire organization for delivering solid financial results in spite of a softer than expected sales environment.  As we entered the third quarter, we were optimistic about our sales prospects for Q3 since we were coming off the first reasonably severe winter in the last three years.  Unfortunately, we had a very cold, wet spring through March and much of April and our sales didn’t respond until spring-like weather arrived in late April.  When the conditions improved, our performance improved significantly which reinforces our optimism about the balance of the selling season.  Our ongoing initiatives, which include enhanced inventory availability, further commercial acceleration and new omni-channel selling initiatives, continue to gain traction as we roll them further across our chain.  As we continue to invest in our business, we remain committed to our disciplined approach of increasing operating earnings and cash flow, and utilizing our balance sheet and capital effectively,” said Bill Rhodes, Chairman, President and Chief Executive Officer.

During the quarter ended May 5, 2018, AutoZone opened 26 new stores and relocated two stores in the U.S., opened four new stores in Mexico and opened no new stores in Brazil.  As of May 5, 2018, the Company had 5,540 stores in 50 states in the U.S., the District of Columbia and Puerto Rico, 536 stores in Mexico, and 16 stores in Brazil for a total store count of 6,092.

AutoZone is the leading retailer and a leading distributor of automotive replacement parts and accessories in the United States.  Each AutoZone store carries an extensive product line for cars, sport utility vehicles, vans and light trucks, including new and remanufactured automotive hard parts, maintenance items, accessories, and non-automotive products.  Many stores also have a commercial sales program that provides commercial credit and prompt delivery of parts and other products to local, regional and national repair garages, dealers, service stations, and public sector accounts.  AutoZone also sells the ALLDATA brand diagnostic and repair software through www.alldata.com. Additionally, we sell automotive hard parts, maintenance items, accessories, and non-automotive products through www.autozone.com and our commercial customers can make purchases through www.autozonepro.comAutoZone does not derive revenue from automotive repair or installation.

AutoZone will host a conference call this morning, Tuesday, May 22, 2018, beginning at 10:00 a.m. (EDT) to discuss its third quarter results.  Investors may listen to the conference call live and review supporting slides on the AutoZone corporate website, www.autozoneinc.com by clicking “Investor Relations,” “Conference Calls.”  The call will also be available by dialing (210) 839-8923.  A replay of the call and slides will be available on AutoZone’s website.  In addition, a replay of the call will be available by dialing (203) 369-1211 through Tuesday, May 29, 2018, at 11:59 p.m. (EDT).

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, adjusted debt to EBITDAR and cash flow before share repurchases.  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 and manages cash flows available for share repurchase by monitoring cash flows before share repurchases, as shown on the attached tables.  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 in this press release are forward-looking statements.  Forward-looking statements typically use words such as “believe,” “anticipate,” “should,” “intend,” “plan,” “will,” “expect,” “estimate,” “project,” “positioned,” “strategy” 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; energy prices; weather; competition; credit market conditions; access to available and feasible financing; the impact of recessionary conditions; consumer debt levels; changes in laws or regulations; war and the prospect of war, including terrorist activity; inflation; the ability to hire and retain qualified employees; construction delays; the compromising of the confidentiality, availability, or integrity of information, including cyber attacks; and raw material costs of our suppliers.  Certain of these risks are discussed in more detail in the “Risk Factors” section contained in Item 1A under Part 1 of the Annual Report on Form 10-K for the year ended August 26, 2017, 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, and events described above and in the “Risk Factors” could materially and adversely affect our business. 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. Actual results may materially differ from anticipated results.

Contact Information:
Financial: Brian Campbell at (901) 495-7005, brian.campbell@autozone.com
Media: Ray Pohlman at (866) 966-3017, ray.pohlman@autozone.com

AutoZone's 3rd Quarter Highlights - Fiscal 2018    
           
Condensed Consolidated Statements of Operations       
3rd Quarter, FY2018        
(in thousands, except per share data)        
    GAAP Results    
    12 Weeks Ended 12 Weeks Ended    
    May 5, 2018 May 6, 2017    
           
Net sales $2,660,152  $2,619,007     
Cost of sales  1,237,178   1,240,589     
Gross profit  1,422,974   1,378,418     
Operating, SG&A expenses  877,209   848,848     
Operating profit  (EBIT)  545,765   529,570     
Interest expense, net  41,958   35,675     
Income before taxes  503,807   493,895     
Income taxes(1)  137,086   162,195     
Net income $366,721  $331,700     
Net income per share:        
 Basic $13.62  $11.70     
 Diluted(1) $13.42  $11.44     
Weighted average shares outstanding:        
 Basic  26,926   28,358     
 Diluted  27,329   29,005     
           
(1) For the twelve weeks ended May 5, 2018 and the comparable prior year period, net income per share includes excess tax benefits from stock option exercises related to the adoption of ASU 2016-09 of $0.01 and $0.40, respectively. Additionally, the current quarter results benefitted from the recent tax reform  
           
       
Year-To-Date 3rd Quarter, FY2018        
(in thousands, except per share data) GAAP Results    
    36 Weeks Ended 36 Weeks Ended    
    May 5, 2018 May 6, 2017    
           
Net sales $7,662,309  $7,376,071     
Cost of sales  3,596,442   3,490,575     
Gross profit  4,065,867   3,885,496     
Operating, SG&A expenses  2,846,250   2,513,054     
Operating profit  (EBIT)  1,219,617   1,372,442     
Interest expense, net  120,186   103,180     
Income before taxes  1,099,431   1,269,262     
Income taxes (1)  162,177   422,293     
Net income $937,254  $846,969     
Net income per share:        
 Basic $34.32  $29.57     
 Diluted(1) $33.75  $28.86     
Weighted average shares outstanding:        
 Basic  27,306   28,638     
 Diluted  27,769   29,349     
           
(1) For the thirty-six weeks ended May 5, 2018 and the comparable prior year period, net income per share includes excess tax benefits from stock option exercises related to the adoption of ASU 2016-09 of $1.25 and $0.93, respectively. Additionally, year-to-date results were negatively impacted by asset impairments of $193.2MM (pre-tax) recognized in the second quarter of fiscal 2018, and benefitted from the recent tax reform (effective January 1, 2018)  
GAAP Reconciliations        
(in thousands, except per share data)        
           
Selected Balance Sheet Information        
(in thousands)        
    May 5, 2018 May 6, 2017 August 26, 2017  
Cash and cash equivalents $218,386  $227,141  $293,270   
Merchandise inventories  4,005,820   3,861,052   3,882,086   
Current assets  4,671,277   4,507,249   4,611,255   
Property and equipment, net  4,122,966   3,904,152   4,031,018   
Total assets  9,301,769   9,028,264   9,259,781   
Accounts payable  4,296,677   4,140,690   4,168,940   
Current liabilities  4,918,336   4,793,540   4,766,301   
Total debt  4,954,697   5,152,843   5,081,238   
Stockholders' deficit  (1,361,603)  (1,714,214)  (1,428,377)  
Working capital  (247,059)  (286,291)  (155,046)  
           


Condensed Consolidated Statements of Operations        
           
Adjusted Debt / EBITDAR (Trailing 4 Qtrs)        
(in thousands, except adjusted debt to EBITDAR ratio)        
    May 5, 2018 May 6, 2017    
Net income $1,371,154  $1,273,737     
Add:  Impairment before tax impact  193,162   -     
Interest  171,586   148,968     
Taxes  384,504   653,103     
Adjusted EBIT  2,120,406   2,075,808     
           
Add:  Depreciation and amortization  340,154   313,920     
Rent expense  314,525   294,641     
Share-based expense  38,460   40,716     
EBITDAR $2,813,545  $2,725,085     
           
Debt  $4,954,697  $5,152,843     
Capital lease obligations  160,452   151,961     
Add: rent x 6  1,887,150   1,767,846     
Adjusted debt $7,002,299  $7,072,650     
           
Adjusted debt to EBITDAR  2.5   2.6     
    
           
Selected Cash Flow Information        
(in thousands)        
    12 Weeks Ended 12 Weeks Ended 36 Weeks Ended 36 Weeks Ended
    May 5, 2018 May 6, 2017 May 5, 2018 May 6, 2017
           
Depreciation and amortization $79,754  $75,343  $237,091  $219,988
Capital spending  112,401   141,831   327,148   357,934
           
Cash flow before share repurchases:        
Increase (decrease) in cash and cash equivalents $(70,136) $16,492  $(74,884) $37,407
Less (decrease)/increase in debt  (90,000)  5,100   (129,600)  230,700
Add back share repurchases  399,701   283,564   927,155   844,183
Cash flow before share repurchases and changes in debt $419,565  $294,956  $981,871  $650,890
           
Other Selected Financial Information        
(in thousands, except ROIC)        
    May 5, 2018 May 6, 2017    
           
           
Cumulative share repurchases ($ since fiscal 1998) $18,753,453  $17,598,832     
Remaining share repurchase authorization ($)  896,547   1,051,168     
           
Cumulative share repurchases (shares since fiscal 1998)  143,714   141,924     
           
Shares outstanding, end of quarter  26,662   28,155     
           
    Trailing 4 Quarters    
    May 5, 2018 May 6, 2017    
Net income $1,371,154  $1,273,737     
Adjustments:        
Impairment before tax impact  193,162   -     
Interest expense  171,586   148,968     
Rent expense  314,525   294,641     
Tax effect*  (184,103)  (150,383)    
Deferred tax liabilities, net  (136,679)  -     
After-tax return $1,729,645  $1,566,963     
           
Average debt**  5,043,061   5,035,993     
Average stockholders' deficit**  (1,471,968)  (1,817,540)    
Add: Rent x 6  1,887,150   1,767,846     
Average capital lease obligations**  155,729   145,749     
Pre-tax invested capital $5,613,972  $5,132,048     
           
Return on Invested Capital (ROIC)  30.8%   30.5%     
           
* Effective tax rate over trailing four quarters ended May 5, 2018, excluding the impact of the revaluation of net deferred tax liabilities, is 28.3% and May 6, 2017 is 33.9%.
                  
** All averages are computed based on trailing 5 quarter balances.
           


AutoZone's 3rd Quarter Fiscal 2018          
Selected Operating Highlights            
Condensed Consolidated Statements of Operations          
                
Location Count & Square Footage            
                
     12 Weeks Ended  12 Weeks Ended  36 Weeks Ended  36 Weeks Ended 
     May 5, 2018  May 6, 2017  May 5, 2018  May 6, 2017 
AutoZone Domestic stores (Domestic):            
 Store count:            
 Beginning domestic stores  5,514    5,346    5,465    5,297  
 Stores opened  26    35    77    84  
 Stores closed  -    -    2    -  
 Ending domestic stores  5,540    5,381    5,540    5,381  
                
 Relocated stores  2    2    3    4  
                
 Stores with commercial programs  4,683    4,493    4,683    4,493  
                
 Square footage (in thousands)  36,216    35,150    36,216    35,150  
                
AutoZone Mexico stores:            
 Stores opened  4    8    12    16  
 Total stores in Mexico  536    499    536    499  
                
AutoZone Brazil stores:            
 Stores opened  -    -    2    1  
 Total stores in Brazil  16    9    16    9  
                
Total AutoZone stores  6,092    5,889    6,092    5,889  
 Square footage (in thousands)  40,294    38,900    40,294    38,900  
 Square footage per store  6,614    6,606    6,614    6,606  
                
IMC branches:             
 Branches sold  (26)   -    (26)   -  
 Total IMC branches  -    26    -    26  
                
Total locations chainwide  6,092    5,915    6,092    5,915  
                
Sales Statistics             
($ in thousands, except sales per average square foot)            
     12 Weeks Ended  12 Weeks Ended  Trailing 4 Quarters  Trailing 4 Quarters 
Total AutoZone Parts (Domestic, Mexico and Brazil) May 5, 2018  May 6, 2017  May 5, 2018  May 6, 2017 
 Sales per average store $425   $424   $1,785   $1,768  
 Sales per average square foot $64   $64   $270   $268  
                
Total Auto Parts (Domestic, Mexico, Brazil and IMC)             
 Total auto parts sales $2,610,485 (1) $2,530,689   $10,849,645 (1) $10,408,512  
 % Increase vs. LY  3.2%    1.1%    4.2%    2.5%  
                
Domestic Commercial             
 Total domestic commercial sales $535,187   $498,575   $2,154,853   $2,025,481  
 % Increase vs. LY  7.3%    3.6%    6.4%    5.5%  
                
All Other (ALLDATA, E-Commerce and AutoAnything)           
 All other sales $49,667 (2) $88,318   $325,268 (2) $366,329  
 % Increase vs. LY  (43.8%)   (2.5%)   (11.2%)   (0.9%) 
                
  (1)Results include IMC which was sold during the quarter, effective April 4, 2018           
  (2)Results include AutoAnything, which was sold during the quarter, effective February 26, 2018          
                
     12 Weeks Ended  12 Weeks Ended  36 Weeks Ended  36 Weeks Ended 
     May 5, 2018  May 6, 2017  May 5, 2018  May 6, 2017 
Domestic same store sales   0.6%    (0.8%)   1.7%    0.2%  
                
Inventory Statistics (Total Locations)            
     as of  as of       
     May 5, 2018  May 6, 2017       
 Accounts payable/inventory  107.3%    107.2%        
                
 ($ in thousands)             
 Inventory  $4,005,820   $3,861,052        
 Inventory per location  658    653        
 Net inventory (net of payables)  (290,857)   (279,638)       
 Net inventory  / per location  (48)   (47)       
                
     Trailing 5 Quarters       
     May 5, 2018  May 6, 2017       
 Inventory turns  1.3 x  1.4 x      
                

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Source: AutoZone, Inc.