AutoZone, Inc. AZO reported a 13.1% rise in earnings per share to $9.57 for the third quarter of fiscal 2015 (ended May 9, 2015) from $8.46 recorded in the year-ago quarter. Earnings also surpassed the Zacks Consensus Estimate of $9.50. Net income increased 8.4% to $309.1 million from $285.2 million a year ago.
Quarterly revenues improved 6.5% year over year to $2.49 billion, marginally missing the Zacks Consensus Estimate of $2.50 billion. Domestic same-store sales (sales for stores open at least for one year) grew 2.3% in the reported quarter.
Gross profit increased to $1.30 billion (or 52.3% of sales) from $1.22 billion (or 52.0% of sales) in the prior-year quarter. The year-over-year improvement in margins was backed by increased merchandise margins, partially offset by the impact of the Interamerican Motor Corporation (“IMC”) acquisition.
Operating profit improved to $513.9 million from $479 million in the third quarter of fiscal 2014. Operating expenses, as a percentage of sales, went up to 31.6% from 31.5% a year ago due to the impact of the IMC acquisition.
Store Opening and Inventory
AutoZone opened 27 stores in the U.S., 7 stores in Mexico and 2 stores in Brazil during the reported quarter. Additionally, it relocated one store in the U.S. Further, IMC relocated its East Coast distribution center and related branch during the quarter. As of May 9, 2015, the company had 5,069 stores in 49 states, the District of Columbia and Puerto Rico in the U.S., 418 stores in Mexico, 7 stores in Brazil and 18 IMC branches. Thus, the total store count was 5,512 as of that date.
AutoZone’s inventory grew 10.7% year over year in the quarter, driven by store openings, the IMC acquisition and higher product placement. Inventory per store increased to $629,000 from $594,000 in the corresponding quarter of fiscal 2014.
Share Repurchase
In the reported quarter, AutoZone repurchased 763,000 shares for $515 million, reflecting an average price of $675 per share. The company had shares worth $778 million remaining for repurchase at the end of the third quarter.
Financial Details
AutoZone had cash and cash equivalents of $153.3 million as of May 9, 2015, up from $145.3 million as of May 10, 2014. Total debt amounted to $4.53 billion as of May 9, 2015, compared with $4.38 billion as of May 10, 2014. The company had a stockholders’ deficit of $1.64 billion as of May 9, 2015, down from $1.81 billion as of May 10, 2014.
During the first nine months of fiscal 2015, AutoZone generated net cash flow of $680.2 million before share repurchases and changes in debt as against $723.3 million in the first nine months of fiscal 2014. Capital spending increased to $292.7 million from $261.7 million recorded in the first nine months of fiscal 2014.
Currently, AutoZone carries a Zacks Rank #3 (Hold).Better-ranked automobile stocks include CarMax Inc. KMX, O'Reilly Automotive Inc. ORLY and U.S. Auto Parts Network, Inc. PRTS, all carrying a Zacks Rank #2 (Buy).
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