Company Update (NYSE:AZO): AutoZone, Inc. 4th Quarter Same Store Sales Increase 4.5%

AutoZone, Inc. (NYSE:AZO) reported net sales of $3.3 billion for its fourth quarter (16 weeks) ended August 29, 2015, an increase of 7.9% from the fourth quarter of fiscal 2014 (16 weeks). Domestic same store sales, or sales for stores open at least one year, increased 4.5% for the quarter.

Net income for the quarter increased 7.4% over the same period last year to $401.1 million, while diluted earnings per share increased 13.0% to $12.75 per share from$11.28 per share in the year-ago quarter.

For the quarter, gross profit, as a percentage of sales, was 52.5% (versus 52.3% for the same period last year). The improvement in gross margin was attributable to higher merchandise margins, partially offset by higher supply chain costs associated with current year inventory initiatives (-24 bps), and the impact of the Interamerican Motor Corporation (IMC) acquisition finalized during September, 2014 (-24 bps). Operating expenses, as a percentage of sales, were 32.2% (versus 31.6% the same period last year). The increase in operating expenses, as a percentage of sales, was primarily due to higher legal costs (-26 bps) and the impact of IMC (-16 bps).

For the fiscal year ended August 29, 2015, sales were $10.2 billion, an increase of 7.5% from the prior year, while domestic same store sales were up 3.8% for the year. Operating profit increased 6.7% on an operating margin of 19.2%. For fiscal 2015, net income increased 8.5% to $1.2 billion, while diluted earnings per share for the period increased 14.1% to $36.03 from $31.57. Return on invested capital was 31.2%, while full year cash flow before share repurchases and changes in debt was $1.018 billion.

Under its share repurchase program, AutoZone repurchased 633 thousand shares of its common stock for $430 million during the fourth quarter, at an average price of $680per share. For the fiscal year, the Company repurchased 2.0 million shares of its common stock for $1.3 billion, at an average price of $632 per share. At year end, the Company had $348 million remaining under its current share repurchase authorization.

The Company’s inventory increased 9.0% over the same period last year, driven by increased product placement, new stores during the fiscal year, and the acquisition of IMC. Inventory per location was $610 thousand versus $582 thousand last year and$629 thousand last quarter. The IMC acquisition increased inventory per location by $15 thousand this quarter. Net inventory, defined as merchandise inventories less accounts payable, on a per location basis was a negative $79 thousand versus negative $87 thousand last year and negative $68 thousand last quarter.

“I would like to thank our entire organization for the strong performance delivered this past fiscal year. We are pleased to report our thirty-sixth consecutive quarter of double digit earnings per share growth. Since our inception, we’ve been committed to providing exceptional customer service and trustworthy advice; our key point of differentiation. This commitment to our customers leads us to deliver exceptional financial performance. For the year, we reached many milestones which included generating over $10 billion in sales and completing the IMC acquisition. Our testing of our inventory availability initiatives, including expanding our multi-deliveries per week to stores and opening mega hub locations has concluded. We have determined that these tests were successful and we will begin implementing our new supply chain strategy now and complete it in a few years. Additionally, as we have routinely stated, we will remain committed to our disciplined approach to growing operating earnings and utilizing our capital effectively,” said Bill Rhodes, Chairman, President and Chief Executive Officer.

During the quarter ended August 29, 2015, AutoZone opened 72 new stores and relocated two stores in the U.S., opened 23 new stores in Mexico, and opened two new IMC branches. As of August 29, 2015, the Company had 5,141 stores in 49 states in the U.S., the District of Columbia and Puerto Rico, 441 stores in Mexico, 20 IMC branches, and seven stores in Brazil for a total count of 5,609. (Original Source)

Shares of AutoZone Inc closed yesterday at $728.40. AZO has a 1-year high of $754.90 and a 1-year low of $491.93. The stock’s 50-day moving average is $720.80 and its 200-day moving average is $690.12.

On the ratings front, AutoZone has been the subject of a number of recent research reports. In a report released yesterday, Deutsche Bank analyst Michael Baker maintained a Hold rating on AZO, with a price target of $650, which implies a downside of 10.8% from current levels. Separately, on September 16, Wedbush’s Seth Basham maintained a Hold rating on the stock and has a price target of $720.

According to, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Michael Baker and Seth Basham have a total average return of 3.0% and 15.3% respectively. Baker has a success rate of 59.3% and is ranked #1373 out of 3768 analysts, while Basham has a success rate of 64.3% and is ranked #582.

Overall, 2 research analysts have assigned a Hold rating and 2 research analysts have given a Buy rating to the stock. When considering if perhaps the stock is under or overvalued, the average price target is $798.33 which is 9.6% above where the stock closed yesterday.

AutoZone Inc is a retailer and distributor of automotive replacement parts and accessories in the United States. The Company operates stores which carries an extensive product line for cars, sport utility vehicles, vans and light trucks and among others.

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