AutoZone, Inc. AZO reported a 14% rise in earnings per share to $8.29 for the first quarter of fiscal 2016 (ended Nov 21, 2015) from $7.27 recorded in the year-ago quarter. Earnings also surpassed the Zacks Consensus Estimate of $8.20. Net income increased 8.3% to $258.1 million from $238.3 million a year ago.
Quarterly revenues improved 5.6% year over year to $2.39 billion, in line with the Zacks Consensus Estimate. Domestic same-store sales (sales for stores open at least for one year) grew 3.5% in the reported quarter.
Gross profit increased to $1.25 billion (or 52.5% of sales) from $1.18 billion (or 52.1% of sales) in the prior-year quarter. The year-over-year improvement in gross margin was backed by increased merchandise margins, partially offset by elevated supply chain costs due to current year inventory initiatives.
Operating profit improved to $438 million from $408.6 million in the first quarter of fiscal 2015. Operating expenses, as a percentage of sales, rose to 34.2% from 34.0% a year ago owing to the impact of the Interamerican Motor Corporation (“IMC”) acquisition and higher domestic store payroll, partially offset by lower legal costs.
Store Opening and Inventory
AutoZone opened 22 stores in the U.S., 1 store in Mexico and Brazil each, and 2 IMC branches during the quarter. Additionally, it relocated a store in the U.S. As of Nov 21, 2015, the company had 5,163 stores in 50 states, the District of Columbia and Puerto Rico in the U.S., 442 stores in Mexico, 8 stores in Brazil and 22 IMC branches. Thus, the total store count was 5,635 as of that date.
AutoZone’s inventory grew 7.2% year over year in the quarter, driven by store openings and higher product placement. Inventory per store increased to $624,000 from $604,000 in the corresponding quarter of fiscal 2015.
Share Repurchases
In the reported quarter, AutoZone repurchased 537,000 shares for $400 million, reflecting an average price of $746 per share. The company had shares worth $698 million remaining for repurchase at the end of the first quarter.
Financial Details
AutoZone had cash and cash equivalents of $165.5 million as of Nov 21, 2015, up from $117.2 million as of Nov 22, 2014. Total debt amounted to $4.75 billion as of Nov 21, 2015, compared with $4.40 billion as of Nov 22, 2014. The company had a stockholders’ deficit of $1.78 billion as of Nov 21, 2015, up from $1.66 billion as of Nov 22, 2014.
During first-quarter fiscal 2016, AutoZone generated net cash flow of $261.98 million before share repurchases and changes in debt compared with $214.01 million in first-quarter fiscal 2015. Capital spending decreased to $86.7 million from $92.4 million a year ago.
Zacks Rank
Currently, AutoZone carries a Zacks Rank #3 (Hold). Better-ranked automobile stocks include General Motors Co. GM, O'Reilly Automotive Inc. ORLY and Fox Factory Holding Corp FOXF, all carrying a Zacks Rank #2 (Buy).
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