AutoZone 1st Quarter Same Store Sales Increase 3.4%; EPS Increases to $14.30

Date : 12/10/2019 @ 11:55AM
Source : GlobeNewswire Inc.
Stock : AutoZone Inc (AZO)
Quote : 794.65  17.79 (2.29%) @ 10:29PM
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AutoZone 1st Quarter Same Store Sales Increase 3.4%; EPS Increases to $14.30

AutoZone (NYSE:AZO)
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AutoZone, Inc. (NYSE: AZO) today reported net sales of $2.8 billion for its first quarter (12 weeks) ended November 23, 2019, an increase of 5.7% from the first quarter of fiscal 2019 (12 weeks).  Domestic same store sales, or sales for stores open at least one year, increased 3.4% for the quarter.

Operating profit increased 2.5% to $500.0 million. Net income for the quarter decreased 0.3% over the same period last year to $350.3 million, while diluted earnings per share increased 6.2% to $14.30 per share from $13.47 per share in the year-ago quarter. The decrease in net income was driven by an increased effective tax rate resulting from a reduced benefit from stock options exercised during the quarter. The benefit from stock options increased EPS by $0.06 versus $0.43 last year.

For the quarter, gross profit, as a percentage of sales, was relatively flat to last year at 53.7%.  Operating expenses, as a percentage of sales, were 35.8% (versus 35.2% the same period last year), with deleverage primarily driven by domestic store payroll and benefits.

Under its share repurchase program, AutoZone repurchased 403 thousand shares of its common stock for $450.0 million during the first quarter, at an average price of $1,116 per share.  At the end of the first quarter, the Company had $1.3 billion remaining under its current share repurchase authorization.

The Company’s inventory increased 9.1% over the same period last year, driven by new stores and increased product placement.  Inventory per store was $694 thousand versus $658 thousand last year and $674 thousand last quarter.  Net inventory, defined as merchandise inventories less accounts payable, on a per store basis, was a negative $71 thousand versus negative $59 thousand last year and negative $85 thousand last quarter.

“I would like to thank and congratulate our entire organization for delivering solid sales and earnings in our first fiscal quarter. Our business strengthened during the quarter with accelerated growth in both Retail and Commercial. The hard work of our AutoZoners and their dedication to providing superior customer service, again drove our strong quarterly performance. As our industry’s fundamentals remain healthy, we are optimistic about what we can accomplish this new year, with our ongoing initiatives in place to improve inventory availability, drive DIY sales, and continue to grow Commercial substantially faster than industry growth. We believe our efforts will allow us to meet or exceed our customers’ needs across all channels. As we opportunistically invest capital in our business, we remain committed to our disciplined approach of increasing operating earnings and cash flow, and of utilizing our balance sheet and capital effectively,” said Bill Rhodes, Chairman, President and Chief Executive Officer.

During the quarter ended November 23, 2019, AutoZone opened 18 new stores in the U.S., two in Mexico and two in Brazil.  As of November 23, 2019, the Company had 5,790 stores in the U.S., 606 stores in Mexico, and 37 stores in Brazil for a total store count of 6,433.

AutoZone is the leading retailer and a leading 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 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. We also have commercial programs in stores in Mexico and Brazil.  AutoZone also sells the ALLDATA brand automotive diagnostic and repair software through www.alldata.com and www.alldatadiy.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.com. Additionally, on www.duralastparts.com we provide product information on our Duralast branded product.  AutoZone does not derive revenue from automotive repair or installation services.

AutoZone will host a conference call this morning, Tuesday, December 10, 2019, beginning at 10:00 a.m. (EST) to discuss its first quarter results.  Investors may listen to the conference call live and review supporting slides on the AutoZone corporate website, www.autozone.com by clicking “Investor Relations,” located at the bottom of the page.  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 Thursday, January 9, at 11:59 p.m. (EST).

This release includes certain financial information not derived in accordance with generally accepted accounting principles (“GAAP”).  These non-GAAP financial measures include adjustments to reflect return on invested capital, adjusted debt and adjusted debt to EBITDAR.  These calculations include adjustments for impairment charges, pension termination charges and deferred tax liabilities. 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 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; energy prices; weather; competition; credit market conditions; cash flows; access to available and feasible financing; future stock repurchases; 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, train and retain qualified employees; construction delays; the compromising of confidentiality, availability or integrity of information, including cyber-attacks; historic growth rate sustainability; downgrade of our credit ratings; damages to our reputation; challenges in international markets; failure or interruption of our information technology systems; origin and raw material costs of suppliers; impact of tariffs; anticipated impact of new accounting standards; and 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 Annual Report on Form 10-K for the year ended August 31, 2019, 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.comMedia: David McKinney at (901) 495-7951, david.mckinney@autozone.com

AutoZone's 1st Quarter Highlights - Fiscal 2020

     
Condensed Consolidated Statements of Operations    
1st Quarter, FY2020    
(in thousands, except per share data)    
   GAAP Results
   12 Weeks Ended 12 Weeks Ended
   November 23, 2019 November 17, 2018
      
Net sales $  2,793,038 $  2,641,733
Cost of sales 1,291,970 1,224,259
Gross profit   1,501,068   1,417,474
Operating, SG&A expenses 1,001,045 929,656
Operating profit  (EBIT)   500,023   487,818
Interest expense, net 43,743 39,006
Income before taxes   456,280   448,812
Income taxes(1) 105,942 97,406
Net income $  350,338 $  351,406
Net income per share:     
 Basic $  14.67 $  13.71
 Diluted $  14.30 $  13.47
Weighted average shares outstanding:    
 Basic 23,875 25,629
 Diluted 24,493 26,097
      
(1)The Company's effective tax rate was 23.2% for the 12 Weeks Ended November 23, 2019 and 21.7% for the comparable prior year period. First quarter fiscal 2020 and 2019 include $1.5M and $11.2M in excess tax benefits from stock option exercises, respectively.
      

Selected Balance Sheet Information      
(in thousands)      
  November 23, 2019 November 17, 2018 August 31, 2019
Cash and cash equivalents $158,089  $252,086  $176,300 
Merchandise inventories  4,463,124   4,090,376   4,319,113 
Current Assets  5,156,975   4,814,329   5,028,685 
Property and equipment, net  4,450,656   4,228,801   4,398,751 
Operating lease right-of-use assets  2,585,105   -   - 
Total assets  12,700,456   9,523,581   9,895,913 
Accounts payable  4,922,148   4,455,330   4,864,912 
Current Liabilities  5,868,236   5,168,172   5,512,141 
Operating lease liabilities - long-term  2,506,829   -   - 
Total debt  5,287,324   5,156,037   5,206,344 
Stockholders' (deficit)  (1,776,090)  (1,658,616)  (1,713,851)
Working capital  (711,261)  (353,843)  (483,456)
       

     
AutoZone's 1st Quarter Highlights - Fiscal 2020    
          
Condensed Consolidated Statements of Operations       
          
Adjusted Debt / EBITDAR (Trailing 4 Qtrs)      
(in thousands, except adjusted debt to EBITDAR ratio)      
     November 23, 2019 November 17, 2018  
Net income  $1,616,153  $1,407,939   
Add: Impairment before tax  -   193,162   
         Pension termination charges before tax  -   130,263   
         Interest   189,541   174,644   
         Taxes   422,648   247,337   
Adjusted EBIT  2,228,342   2,153,345   
          
Add: Depreciation and amortization  377,255   349,550   
        Rent expense(1)  337,102   317,141   
        Share-based expense  42,724   43,115   
Adjusted EBITDAR $2,985,423  $2,863,151   
          
Debt   $5,287,324  $5,156,037   
Financing lease liabilities  195,663   158,284   
Add: Rent x 6(1)  2,022,612   1,902,846   
Adjusted debt $7,505,599  $7,217,167   
          
Adjusted debt to EBITDAR  2.5   2.5   
  
Adjusted Return on Invested Capital (ROIC)      
(in thousands, except ROIC)      
     Trailing 4 Quarters  
     November 23, 2019 November 17, 2018  
Net income  $1,616,153  $1,407,939   
Adjustments:      
        Impairment before tax  -   193,162   
        Pension termination charges before tax  -   130,263   
        Interest expense  189,541   174,644   
        Rent expense(1)  337,102   317,141   
        Tax effect(2)  (109,015)  (201,217)  
        Deferred tax liabilities, net of repatriation tax  (6,340)  (132,113)  
Adjusted After-tax return $2,027,441  $1,889,819   
          
Average debt(3) $5,182,565  $5,028,638   
Average stockholders' deficit(3)  (1,666,486)  (1,479,244)  
Add: Rent x 6(1)  2,022,612   1,902,846   
Average financing lease liabilities(3)  170,863   157,763   
Pre-tax invested capital $5,709,554  $5,610,003   
          
Adjusted ROIC  35.5%  33.7%  
          
(1) Effective September 1, 2019, the Company adopted ASC 842, the new lease accounting standard that required the Company to recognize operating lease assets and liabilities on the balance sheet. 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 12 weeks ended November 23, 2019. 
          
  Total lease cost, per ASC 842, for the 12 weeks ended November 23, 2019 $95,840   
  Less:Financing lease interest and amortization    (14,041)  
  Less:Variable operating lease components, related to insurance and common area maintenance for the 12 weeks ended November 23, 2019  (6,207)  
  Rent expense for the 12 weeks ended November 23, 2019   75,592   
  Add:Rent expense for the 41 weeks ended August 31, 2019, as previously reported prior to the adoption of ASC 842  261,510   
  Rent expense for the 53 weeks ended November 23, 2019  $337,102   
          
(2) Effective tax rate over trailing four quarters ended November 23, 2019 is 20.7%. Effective tax rate over trailing four quarters ended November 17, 2018 was 24.2% for impairment, 28.1% for pension termination and 23.4% for interest and rent expense. 
(3) All averages are computed based on trailing 5 quarter balances.     
          
Other Selected Financial Information      
(in thousands, except ROIC)      
     November 23, 2019 November 17, 2018  
Cumulative share repurchases ($ since fiscal 1998) $21,873,206  $19,915,371   
Remaining share repurchase authorization ($)  1,276,794   984,629   
          
Cumulative share repurchases (shares since fiscal 1998)  147,273   145,342   
          
Shares outstanding, end of quarter  23,655   25,216   
          
Depreciation and amortization  89,750   82,452   
          
Capital spending  101,407   98,168   
           

        
AutoZone's 1st Quarter Highlights - Fiscal 2020       
              
Condensed Consolidated Statements of Operations          
              
Store Count & Square Footage            
              
   12 Weeks Ended 12 Weeks Ended        
   November 23, 2019  November 17, 2018       
Domestic:            
 Store count:            
 Beginning stores  5,772    5,618        
 Stores opened  18    13        
 Ending domestic stores  5,790    5,631        
              
 Relocated stores  -    1        
              
 Stores with commercial programs  4,917    4,766        
              
 Square footage (in thousands)  37,910    36,836        
              
Mexico:            
 Beginning stores  604    564        
 Stores opened  2    3        
 Ending Mexico stores  606    567        
              
Brazil:            
 Beginning stores  35    20        
 Stores opened  2    -        
 Ending Brazil stores  37    20        
              
Total stores  6,433    6,218        
              
 Square footage (in thousands)  42,695    41,180        
 Square footage per store  6,637    6,623        
              
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) November 23, 2019  November 17, 2018  November 23, 2019  November 17, 2018 
 Sales per average store $427   $418   $1,865   $1,792  
 Sales per average square foot $64   $63   $281   $271  
              
Total Auto Parts (Domestic, Mexico and Brazil)            
 Total auto parts sales $2,743,239   $2,593,440   $11,795,034   $11,034,810 (1)
   % Increase vs. LY  5.8%   3.3%   6.9%   3.7% 
              
Domestic Commercial            
 Total domestic commercial sales $621,483   $546,908   $2,637,406   $2,269,864  
   % Increase vs. LY  13.6%   11.3%   16.2%   8.4% 
              
All Other (ALLDATA)            
 All other sales $49,799   $48,293   $220,013   $238,870 (2)
   % Increase vs. LY  3.1%   (38.9%)   (7.9%)   (34.8%) 
              
(1)Results include IMC, which was sold during the third quarter of fiscal 2018 (effective April 4, 2018).       
(2)Results include AutoAnything, which was sold during the third quarter of fiscal 2018 (effective February 26, 2018).       
              
   12 Weeks Ended 12 Weeks Ended       
   November 23, 2019  November 17, 2018       
Domestic same store sales  3.4%   2.7%       
              
Inventory Statistics (Total Stores)            
   as of  as of       
   November 23, 2019  November 17, 2018       
 Accounts payable/inventory  110.3%   108.9%       
              
($ in thousands)            
 Inventory $4,463,124   $4,090,376        
 Inventory per store  694    658        
 Net inventory (net of payables)  (459,024)   (364,954)       
 Net inventory/per store  (71)   (59)       
              
   Trailing 5 Quarters      
   November 23, 2019  November 17, 2018       
 Inventory turns  1.3 x  1.3 x      
              

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