AutoZone, Inc. AZO reported a Array4.2% rise in earnings per share to $7.43 for the second quarter of fiscal 20Array6 (ended Feb Array3, 20Array6) from $6.5Array recorded in the year-ago quarter. Earnings also surpassed the Zacks Consensus Estimate of $7.27. Net income increased 8% to $228.6 million from $2ArrayArray.7 million a year ago.
Quarterly revenues improved 5.3% year over year to $2.26 billion in the reported quarter, coming in line with the Zacks Consensus Estimate. Domestic same-store sales (sales for stores open at least for one year) grew 3.6% in the quarter.
Gross profit increased to $Array.Array9 billion (or 52.7% of sales) from $Array.Array2 billion (or 52.2% 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 $382.7 million from $36Array.3 million in the second quarter of fiscal 20Array5. Operating expenses, as a percentage of sales, increased to 35.8% from 35.4% a year ago owing to a favorable credit card litigation settlement recognized during the year-ago quarter and higher domestic store payroll.
Store Opening and Inventory
AutoZone opened 30 stores in the U.S., 9 stores in Mexico, and 2 Interamerican Motor Corporation (“IMC”) branches during the quarter. Additionally, it relocated 2 stores in the U.S. As of Feb Array3, 20Array6, the company had 5,Array93 stores in 50 states, the District of Columbia and Puerto Rico in the U.S., 45Array stores in Mexico, 8 stores in Brazil and 24 IMC branches. Thus, the total store count was 5,676 as of that date.
AutoZone’s inventory grew 3.9% year over year in the quarter, driven by store openings. Inventory per store increased to $633,000 from $63Array,000 in the second quarter of fiscal 20Array5.
Share Repurchases
In the reported quarter, AutoZone repurchased Array97,000 shares for $Array50 million, reflecting an average price of $76Array per share. The company had shares worth $548 million remaining for repurchase at the end of the second quarter of fiscal 20Array6.
Financial Details
AutoZone had cash and cash equivalents of $208 million as of Feb Array3, 20Array6, up from $Array5Array.5 million as of Feb Array4, 20Array5. Total debt amounted to $4.8 billion as of Feb Array3, 20Array6, compared with $4.4 billion as of Feb Array4, 20Array5. The company had a stockholders’ deficit of $Array.74 billion as of Feb Array3, 20Array6, up from $Array.47 billion as of Feb Array4, 20Array5.
During the first half of fiscal 20Array6, AutoZone generated net cash flow of $364.2 million before share repurchases and changes in debt compared with $248.2 million in first-half fiscal 20Array5. Capital spending increased to $Array86.6 million from $Array86.2 million a year ago.
Zacks Rank
Currently, AutoZone carries a Zacks Rank #3 (Hold). Better-ranked automobile stocks include Cooper Tire & Rubber Co. CTB, Fuji Heavy Industries Ltd. FUJHY and The Goodyear Tire & Rubber Company GT. While both Cooper Tire and Fuji Heavy Industries currently sport a Zacks Rank #Array (Strong Buy), Goodyear holds a Zacks Rank #2 (Buy).
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