AutoZone, Inc. (AZO) reported a 15.6% rise in earnings per share to $7.27 for the first quarter of fiscal 2015 (ended Nov 22, 2014) from $6.29 in the year-ago quarter. Earnings surpassed the Zacks Consensus Estimate of $7.18. Net income went up 9.3% to $238.3 million from $218.1 million in the year-ago quarter.
Quarterly revenues increased 8% year over year to $2.26 billion, surpassing the Zacks Consensus Estimate of $2.22 billion. Domestic same-store sales (sales for stores open at least for one year) increased 4.5% in the quarter.
Gross profit increased to $1.18 billion (or 52.1% of sales) from $1.09 billion (or 51.9% of sales) in the year-ago quarter. The year-over-year growth in margins was due to reduced shrink expense and increased merchandise margins, partially offset by the impact of the Interamerican Motor Corporation (“IMC”) acquisition.
Operating profit improved to $408.6 million from $383.7 million in the first quarter of fiscal 2014. Operating expenses as a percentage of sales increased to 34% from 33.5% a year ago due to higher legal and self-insured medical costs.
Store Opening and Inventory
AutoZone opened 22 stores in the U.S. and 4 stores in Mexico during the quarter. Additionally, it completed the acquisition of 17 branches of IMC. As of Nov 22, 2014, the company had 5,006 stores in 49 states, the District of Columbia and Puerto Rico in the U.S., 406 stores in Mexico, 5 stores in Brazil and 17 IMC branches. Thus, the total store count was 5,434 as of that date.
AutoZone’s inventory grew 11.3% year over year in the quarter, driven by store openings, the IMC acquisition and higher product placement. Inventory per store increased to $604,000 from $566,000 in the corresponding quarter last year.
Share Repurchase
In the reported quarter, AutoZone repurchased 571,000 shares for $300 million, reflecting an average price of $525 per share. The company had shares worth $570 million remaining for repurchase at the end of the first quarter.
Financial Details
AutoZone had cash and cash equivalents of $117.2 million as of Nov 22, 2014, down from $125.9 million as of Nov 23, 2013. Total debt amounted to $4.42 billion as of Nov 22, 2014, compared with $4.17 billion as of Nov 23, 2013. The company had a stockholder deficit of $1.66 billion as of Nov 22, 2014, down from $1.72 billion as of Nov 23, 2013.
During the first quarter of fiscal 2015, AutoZone generated net cash flow of $214 million before share repurchases and changes in debt against $288.7 million in the first quarter of fiscal 2014. Capital spending increased to $92.4 million from $82.6 million recorded in the first quarter of fiscal 2014.
Currently, AutoZone carries a Zacks Rank #3 (Hold). Investors interested in the auto industry could consider better-ranked stocks like Gentex Corp. (GNTX), Douglas Dynamics, Inc. (PLOW) and STRATTEC Security Corp. (STRT), all sporting a Zacks Rank #1 (Strong Buy).
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