AutoZone 3rd Quarter Same Store Sales Increase 0.6%; EPS Increases 17.3% to $13.42
Net income for the quarter increased 10.6% over the same period last year to
For the quarter, gross profit, as a percentage of sales, was 53.5% (versus 52.6% for the same period last year). The increase in gross margin was attributable to higher merchandise margins and the favorable comparison from the impact of the previously announced sale of two business units completed during the quarter (40 bps). Operating expenses, as a percentage of sales, were 33.0% (versus 32.4% the same period last year), with deleverage driven by occupancy costs (27 bps) and increased store payroll.
Under its share repurchase program,
The Company’s inventory increased 3.7% over the same period last year, driven by new stores and increased product placement, partially offset by the impact of the sale of two business units. Inventory per location was
“I would like to thank our entire organization for delivering solid financial results in spite of a softer than expected sales environment. As we entered the third quarter, we were optimistic about our sales prospects for Q3 since we were coming off the first reasonably severe winter in the last three years. Unfortunately, we had a very cold, wet spring through March and much of April and our sales didn’t respond until spring-like weather arrived in late April. When the conditions improved, our performance improved significantly which reinforces our optimism about the balance of the selling season. Our ongoing initiatives, which include enhanced inventory availability, further commercial acceleration and new omni-channel selling initiatives, continue to gain traction as we roll them further across our chain. As we continue to invest in our business, we remain committed to our disciplined approach of increasing operating earnings and cash flow, and utilizing our balance sheet and capital effectively,” said
During the quarter ended
This release includes certain financial information not derived in accordance with generally accepted accounting principles (“GAAP”). These non-GAAP measures include adjustments to reflect return on invested capital, adjusted debt, adjusted debt to EBITDAR and cash flow before share repurchases. The Company believes that the presentation of these non-GAAP measures provides information that is useful to investors as it indicates more clearly the Company’s comparative year-to-year operating results, but this information should not be considered a substitute for any measures derived in accordance with GAAP. Management targets the Company’s capital structure in order to maintain its investment grade credit ratings and manages cash flows available for share repurchase by monitoring cash flows before share repurchases, as shown on the attached tables. The Company believes this is important information for the management of its debt levels and share repurchases. We have included a reconciliation of this additional information to the most comparable GAAP measures in the accompanying reconciliation tables.
Certain statements contained in this press release are forward-looking statements. Forward-looking statements typically use words such as “believe,” “anticipate,” “should,” “intend,” “plan,” “will,” “expect,” “estimate,” “project,” “positioned,” “strategy” and similar expressions. These are based on assumptions and assessments made by our management in light of experience and perception of historical trends, current conditions, expected future developments and other factors that we believe to be appropriate.
These forward-looking statements are subject to a number of risks and uncertainties, including without limitation: product demand; energy prices; weather; competition; credit market conditions; access to available and feasible financing; the impact of recessionary conditions; consumer debt levels; changes in laws or regulations; war and the prospect of war, including terrorist activity; inflation; the ability to hire and retain qualified employees; construction delays; the compromising of the confidentiality, availability, or integrity of information, including cyber attacks; and raw material costs of our suppliers. Certain of these risks are discussed in more detail in the “Risk Factors” section contained in Item 1A under Part 1 of the Annual Report on Form 10-K for the year ended
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Financial:
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AutoZone's 3rd Quarter Highlights - Fiscal 2018 | ||||||||||||||||
Condensed Consolidated Statements of Operations | ||||||||||||||||
3rd Quarter, FY2018 | ||||||||||||||||
(in thousands, except per share data) | ||||||||||||||||
GAAP Results | ||||||||||||||||
12 Weeks Ended | 12 Weeks Ended | |||||||||||||||
May 5, 2018 | May 6, 2017 | |||||||||||||||
Net sales | $ | 2,660,152 | $ | 2,619,007 | ||||||||||||
Cost of sales | 1,237,178 | 1,240,589 | ||||||||||||||
Gross profit | 1,422,974 | 1,378,418 | ||||||||||||||
Operating, SG&A expenses | 877,209 | 848,848 | ||||||||||||||
Operating profit (EBIT) | 545,765 | 529,570 | ||||||||||||||
Interest expense, net | 41,958 | 35,675 | ||||||||||||||
Income before taxes | 503,807 | 493,895 | ||||||||||||||
Income taxes(1) | 137,086 | 162,195 | ||||||||||||||
Net income | $ | 366,721 | $ | 331,700 | ||||||||||||
Net income per share: | ||||||||||||||||
Basic | $ | 13.62 | $ | 11.70 | ||||||||||||
Diluted(1) | $ | 13.42 | $ | 11.44 | ||||||||||||
Weighted average shares outstanding: | ||||||||||||||||
Basic | 26,926 | 28,358 | ||||||||||||||
Diluted | 27,329 | 29,005 | ||||||||||||||
(1) For the twelve weeks ended May 5, 2018 and the comparable prior year period, net income per share includes excess tax benefits from stock option exercises related to the adoption of ASU 2016-09 of $0.01 and $0.40, respectively. Additionally, the current quarter results benefitted from the recent tax reform | ||||||||||||||||
Year-To-Date 3rd Quarter, FY2018 | ||||||||||||||||
(in thousands, except per share data) | GAAP Results | |||||||||||||||
36 Weeks Ended | 36 Weeks Ended | |||||||||||||||
May 5, 2018 | May 6, 2017 | |||||||||||||||
Net sales | $ | 7,662,309 | $ | 7,376,071 | ||||||||||||
Cost of sales | 3,596,442 | 3,490,575 | ||||||||||||||
Gross profit | 4,065,867 | 3,885,496 | ||||||||||||||
Operating, SG&A expenses | 2,846,250 | 2,513,054 | ||||||||||||||
Operating profit (EBIT) | 1,219,617 | 1,372,442 | ||||||||||||||
Interest expense, net | 120,186 | 103,180 | ||||||||||||||
Income before taxes | 1,099,431 | 1,269,262 | ||||||||||||||
Income taxes (1) | 162,177 | 422,293 | ||||||||||||||
Net income | $ | 937,254 | $ | 846,969 | ||||||||||||
Net income per share: | ||||||||||||||||
Basic | $ | 34.32 | $ | 29.57 | ||||||||||||
Diluted(1) | $ | 33.75 | $ | 28.86 | ||||||||||||
Weighted average shares outstanding: | ||||||||||||||||
Basic | 27,306 | 28,638 | ||||||||||||||
Diluted | 27,769 | 29,349 | ||||||||||||||
(1) For the thirty-six weeks ended May 5, 2018 and the comparable prior year period, net income per share includes excess tax benefits from stock option exercises related to the adoption of ASU 2016-09 of $1.25 and $0.93, respectively. Additionally, year-to-date results were negatively impacted by asset impairments of $193.2MM (pre-tax) recognized in the second quarter of fiscal 2018, and benefitted from the recent tax reform (effective January 1, 2018) | ||||||||||||||||
GAAP Reconciliations | ||||||||||||||||
(in thousands, except per share data) | ||||||||||||||||
Selected Balance Sheet Information | ||||||||||||||||
(in thousands) | ||||||||||||||||
May 5, 2018 | May 6, 2017 | August 26, 2017 | ||||||||||||||
Cash and cash equivalents | $ | 218,386 | $ | 227,141 | $ | 293,270 | ||||||||||
Merchandise inventories | 4,005,820 | 3,861,052 | 3,882,086 | |||||||||||||
Current assets | 4,671,277 | 4,507,249 | 4,611,255 | |||||||||||||
Property and equipment, net | 4,122,966 | 3,904,152 | 4,031,018 | |||||||||||||
Total assets | 9,301,769 | 9,028,264 | 9,259,781 | |||||||||||||
Accounts payable | 4,296,677 | 4,140,690 | 4,168,940 | |||||||||||||
Current liabilities | 4,918,336 | 4,793,540 | 4,766,301 | |||||||||||||
Total debt | 4,954,697 | 5,152,843 | 5,081,238 | |||||||||||||
Stockholders' deficit | (1,361,603 | ) | (1,714,214 | ) | (1,428,377 | ) | ||||||||||
Working capital | (247,059 | ) | (286,291 | ) | (155,046 | ) | ||||||||||
Condensed Consolidated Statements of Operations | |||||||||||||||||
Adjusted Debt / EBITDAR (Trailing 4 Qtrs) | |||||||||||||||||
(in thousands, except adjusted debt to EBITDAR ratio) | |||||||||||||||||
May 5, 2018 | May 6, 2017 | ||||||||||||||||
Net income | $ | 1,371,154 | $ | 1,273,737 | |||||||||||||
Add: Impairment before tax impact | 193,162 | - | |||||||||||||||
Interest | 171,586 | 148,968 | |||||||||||||||
Taxes | 384,504 | 653,103 | |||||||||||||||
Adjusted EBIT | 2,120,406 | 2,075,808 | |||||||||||||||
Add: Depreciation and amortization | 340,154 | 313,920 | |||||||||||||||
Rent expense | 314,525 | 294,641 | |||||||||||||||
Share-based expense | 38,460 | 40,716 | |||||||||||||||
EBITDAR | $ | 2,813,545 | $ | 2,725,085 | |||||||||||||
Debt | $ | 4,954,697 | $ | 5,152,843 | |||||||||||||
Capital lease obligations | 160,452 | 151,961 | |||||||||||||||
Add: rent x 6 | 1,887,150 | 1,767,846 | |||||||||||||||
Adjusted debt | $ | 7,002,299 | $ | 7,072,650 | |||||||||||||
Adjusted debt to EBITDAR | 2.5 | 2.6 | |||||||||||||||
Selected Cash Flow Information | |||||||||||||||||
(in thousands) | |||||||||||||||||
12 Weeks Ended | 12 Weeks Ended | 36 Weeks Ended | 36 Weeks Ended | ||||||||||||||
May 5, 2018 | May 6, 2017 | May 5, 2018 | May 6, 2017 | ||||||||||||||
Depreciation and amortization | $ | 79,754 | $ | 75,343 | $ | 237,091 | $ | 219,988 | |||||||||
Capital spending | 112,401 | 141,831 | 327,148 | 357,934 | |||||||||||||
Cash flow before share repurchases: | |||||||||||||||||
Increase (decrease) in cash and cash equivalents | $ | (70,136 | ) | $ | 16,492 | $ | (74,884 | ) | $ | 37,407 | |||||||
Less (decrease)/increase in debt | (90,000 | ) | 5,100 | (129,600 | ) | 230,700 | |||||||||||
Add back share repurchases | 399,701 | 283,564 | 927,155 | 844,183 | |||||||||||||
Cash flow before share repurchases and changes in debt | $ | 419,565 | $ | 294,956 | $ | 981,871 | $ | 650,890 | |||||||||
Other Selected Financial Information | |||||||||||||||||
(in thousands, except ROIC) | |||||||||||||||||
May 5, 2018 | May 6, 2017 | ||||||||||||||||
Cumulative share repurchases ($ since fiscal 1998) | $ | 18,753,453 | $ | 17,598,832 | |||||||||||||
Remaining share repurchase authorization ($) | 896,547 | 1,051,168 | |||||||||||||||
Cumulative share repurchases (shares since fiscal 1998) | 143,714 | 141,924 | |||||||||||||||
Shares outstanding, end of quarter | 26,662 | 28,155 | |||||||||||||||
Trailing 4 Quarters | |||||||||||||||||
May 5, 2018 | May 6, 2017 | ||||||||||||||||
Net income | $ | 1,371,154 | $ | 1,273,737 | |||||||||||||
Adjustments: | |||||||||||||||||
Impairment before tax impact | 193,162 | - | |||||||||||||||
Interest expense | 171,586 | 148,968 | |||||||||||||||
Rent expense | 314,525 | 294,641 | |||||||||||||||
Tax effect* | (184,103 | ) | (150,383 | ) | |||||||||||||
Deferred tax liabilities, net | (136,679 | ) | - | ||||||||||||||
After-tax return | $ | 1,729,645 | $ | 1,566,963 | |||||||||||||
Average debt** | 5,043,061 | 5,035,993 | |||||||||||||||
Average stockholders' deficit** | (1,471,968 | ) | (1,817,540 | ) | |||||||||||||
Add: Rent x 6 | 1,887,150 | 1,767,846 | |||||||||||||||
Average capital lease obligations** | 155,729 | 145,749 | |||||||||||||||
Pre-tax invested capital | $ | 5,613,972 | $ | 5,132,048 | |||||||||||||
Return on Invested Capital (ROIC) | 30.8% | 30.5% | |||||||||||||||
* Effective tax rate over trailing four quarters ended May 5, 2018, excluding the impact of the revaluation of net deferred tax liabilities, is 28.3% and May 6, 2017 is 33.9%. | |||||||||||||||||
** All averages are computed based on trailing 5 quarter balances. |
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AutoZone's 3rd Quarter Fiscal 2018 | ||||||||||||||||||||||||||
Selected Operating Highlights | ||||||||||||||||||||||||||
Condensed Consolidated Statements of Operations | ||||||||||||||||||||||||||
Location Count & Square Footage | ||||||||||||||||||||||||||
12 Weeks Ended | 12 Weeks Ended | 36 Weeks Ended | 36 Weeks Ended | |||||||||||||||||||||||
May 5, 2018 | May 6, 2017 | May 5, 2018 | May 6, 2017 | |||||||||||||||||||||||
AutoZone Domestic stores (Domestic): | ||||||||||||||||||||||||||
Store count: | ||||||||||||||||||||||||||
Beginning domestic stores | 5,514 | 5,346 | 5,465 | 5,297 | ||||||||||||||||||||||
Stores opened | 26 | 35 | 77 | 84 | ||||||||||||||||||||||
Stores closed | - | - | 2 | - | ||||||||||||||||||||||
Ending domestic stores | 5,540 | 5,381 | 5,540 | 5,381 | ||||||||||||||||||||||
Relocated stores | 2 | 2 | 3 | 4 | ||||||||||||||||||||||
Stores with commercial programs | 4,683 | 4,493 | 4,683 | 4,493 | ||||||||||||||||||||||
Square footage (in thousands) | 36,216 | 35,150 | 36,216 | 35,150 | ||||||||||||||||||||||
AutoZone Mexico stores: | ||||||||||||||||||||||||||
Stores opened | 4 | 8 | 12 | 16 | ||||||||||||||||||||||
Total stores in Mexico | 536 | 499 | 536 | 499 | ||||||||||||||||||||||
AutoZone Brazil stores: | ||||||||||||||||||||||||||
Stores opened | - | - | 2 | 1 | ||||||||||||||||||||||
Total stores in Brazil | 16 | 9 | 16 | 9 | ||||||||||||||||||||||
Total AutoZone stores | 6,092 | 5,889 | 6,092 | 5,889 | ||||||||||||||||||||||
Square footage (in thousands) | 40,294 | 38,900 | 40,294 | 38,900 | ||||||||||||||||||||||
Square footage per store | 6,614 | 6,606 | 6,614 | 6,606 | ||||||||||||||||||||||
IMC branches: | ||||||||||||||||||||||||||
Branches sold | (26 | ) | - | (26 | ) | - | ||||||||||||||||||||
Total IMC branches | - | 26 | - | 26 | ||||||||||||||||||||||
Total locations chainwide | 6,092 | 5,915 | 6,092 | 5,915 | ||||||||||||||||||||||
Sales Statistics | ||||||||||||||||||||||||||
($ in thousands, except sales per average square foot) | ||||||||||||||||||||||||||
12 Weeks Ended | 12 Weeks Ended | Trailing 4 Quarters | Trailing 4 Quarters | |||||||||||||||||||||||
Total AutoZone Parts (Domestic, Mexico and Brazil) | May 5, 2018 | May 6, 2017 | May 5, 2018 | May 6, 2017 | ||||||||||||||||||||||
Sales per average store | $ | 425 | $ | 424 | $ | 1,785 | $ | 1,768 | ||||||||||||||||||
Sales per average square foot | $ | 64 | $ | 64 | $ | 270 | $ | 268 | ||||||||||||||||||
Total Auto Parts (Domestic, Mexico, Brazil and IMC) | ||||||||||||||||||||||||||
Total auto parts sales | $ | 2,610,485 | (1 | ) | $ | 2,530,689 | $ | 10,849,645 | (1 | ) | $ | 10,408,512 | ||||||||||||||
% Increase vs. LY | 3.2% | 1.1% | 4.2% | 2.5% | ||||||||||||||||||||||
Domestic Commercial | ||||||||||||||||||||||||||
Total domestic commercial sales | $ | 535,187 | $ | 498,575 | $ | 2,154,853 | $ | 2,025,481 | ||||||||||||||||||
% Increase vs. LY | 7.3% | 3.6% | 6.4% | 5.5% | ||||||||||||||||||||||
All Other (ALLDATA, E-Commerce and AutoAnything) | ||||||||||||||||||||||||||
All other sales | $ | 49,667 | (2 | ) | $ | 88,318 | $ | 325,268 | (2 | ) | $ | 366,329 | ||||||||||||||
% Increase vs. LY | (43.8% | ) | (2.5% | ) | (11.2% | ) | (0.9% | ) | ||||||||||||||||||
(1 | ) | Results include IMC which was sold during the quarter, effective April 4, 2018 | ||||||||||||||||||||||||
(2 | ) | Results include AutoAnything, which was sold during the quarter, effective February 26, 2018 | ||||||||||||||||||||||||
12 Weeks Ended | 12 Weeks Ended | 36 Weeks Ended | 36 Weeks Ended | |||||||||||||||||||||||
May 5, 2018 | May 6, 2017 | May 5, 2018 | May 6, 2017 | |||||||||||||||||||||||
Domestic same store sales | 0.6% | (0.8% | ) | 1.7% | 0.2% | |||||||||||||||||||||
Inventory Statistics (Total Locations) | ||||||||||||||||||||||||||
as of | as of | |||||||||||||||||||||||||
May 5, 2018 | May 6, 2017 | |||||||||||||||||||||||||
Accounts payable/inventory | 107.3% | 107.2% | ||||||||||||||||||||||||
($ in thousands) | ||||||||||||||||||||||||||
Inventory | $ | 4,005,820 | $ | 3,861,052 | ||||||||||||||||||||||
Inventory per location | 658 | 653 | ||||||||||||||||||||||||
Net inventory (net of payables) | (290,857 | ) | (279,638 | ) | ||||||||||||||||||||||
Net inventory / per location | (48 | ) | (47 | ) | ||||||||||||||||||||||
Trailing 5 Quarters | ||||||||||||||||||||||||||
May 5, 2018 | May 6, 2017 | |||||||||||||||||||||||||
Inventory turns | 1.3 | x | 1.4 | x | ||||||||||||||||||||||
Source: AutoZone, Inc.