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AutoZone 1st Quarter Same Store Sales Increase 12.3%; EPS Increases to $18.61

MEMPHIS, Tenn., Dec. 08, 2020 (GLOBE NEWSWIRE) -- AutoZone, Inc. (NYSE: AZO) today reported net sales of $3.2 billion for its first quarter (12 weeks) ended November 21, 2020, an increase of 12.9% from the first quarter of fiscal 2020 (12 weeks). Domestic same store sales, or sales for stores open at least one year, increased 12.3% for the quarter.

“As the COVID-19 global pandemic continues, our primary focus has been and continues to be the health, wellness and safety of our customers and AutoZoners.  Last week, we shared with all eligible AutoZoners that we have again made some significant benefit changes to encourage personal responsibility.  Most notably, we will offer another week of ‘emergency time-off,’ and we will allow an extended carryover of paid time off for much of the new calendar year.  Combined, these enhanced benefits will cost roughly $50 million in our second quarter, but as I told our team last week, it’s an investment in them and the well-being of our customers and their fellow AutoZoners,” said Bill Rhodes, Chairman, President and Chief Executive Officer.

For the quarter, gross profit, as a percentage of sales, was 53.1%, a decrease of 62 basis points versus the prior year. The decrease in gross margin was attributable to one-time pandemic related charges, increased loyalty program participation resulting from increased purchase frequency from existing customers, and a shift in mix. Operating expenses, as a percentage of sales, were 33.6% (versus 35.8% for last year’s quarter), with leverage primarily due to higher sales volumes.

Operating profit increased 23.0% to $615.2 million. Net income for the quarter increased 26.3% over the same period last year to $442.4 million, while diluted earnings per share increased 30.1% to $18.61 per share from $14.30 per share in the year-ago quarter. The increase in net income was driven by strong topline growth.

AutoZone repurchased 584,379 shares of its common stock for $678.3 million during the first quarter, at an average price of $1,161 per share. At the end of the first quarter, the Company had $117.6 million remaining under its current share repurchase authorization.

The Company’s inventory increased 3.7% over the same period last year, driven by new stores and improved product assortment.   Net inventory, defined as merchandise inventories less accounts payable, on a per store basis, was approximately negative $99 thousand versus negative $71 thousand last year and negative $104 thousand last quarter.

“Our team, particularly those in our stores and distribution centers, have not only provided exceptional service to our customers, but they have also delivered very impressive results again.  Together, as 1Team, we delivered double digit same store sales growth, EBIT growth over 20% and earnings per share growth of 30%, all historically significant performances.  And, both our domestic Retail and Commercial sales grew more than 10 percent and our market share growth in both sectors is growing substantially more than industry growth rates.  While our sales have certainly been aided by the COVID-19 pandemic related government stimulus and consumer behavior changes, we have continued to execute on our strategies to improve inventory availability including expanding our Hub and Mega-Hub networks. We are also leveraging technology to improve our service capabilities and efficiency and further penetrating the Commercial market.  Finally, after pausing our share repurchase program due to unprecedented uncertainty, we have returned to leveraging our consistently strong excess free cash flow, after healthy investments in growing the enterprise, to return cash to our shareholders through our stock buyback program,” said Rhodes.

During the quarter ended November 21, 2020, AutoZone opened 39 new stores in the U.S. and two in Brazil. As of November 21, 2020, the Company had 5,924 stores in the U.S., 621 stores in Mexico, and 45 stores in Brazil for a total store count of 6,590.

AutoZone is the leading retailer and a leading distributor of automotive replacement parts and accessories in the Americas. Each AutoZone store carries an extensive product line for cars, sport utility vehicles, vans and light trucks, including new and remanufactured automotive hard parts, maintenance items, accessories, and non-automotive products. Many stores also have a commercial sales program that provides commercial credit and prompt delivery of parts and other products to local, regional and national repair garages, dealers, service stations and public sector accounts. We also have commercial programs in all stores in Mexico and Brazil. AutoZone also sells the ALLDATA brand diagnostic and repair software through www.alldata.com and www.alldatadiy.com. Additionally, we sell automotive hard parts, maintenance items, accessories and non-automotive products through www.autozone.com and our commercial customers can make purchases through www.autozonepro.com. We also provide product information on our Duralast branded products through www.duralastparts.com. AutoZone does not derive revenue from automotive repair or installation.

AutoZone will host a conference call this morning, Tuesday, December 8, 2020, beginning at 10:00 a.m. (EST) to discuss its first quarter results. This call is being web cast and can be accessed, along with supporting slides, at AutoZone’s website at www.autozone.com and clicking on Investor Relations. Investors may also listen to the call by dialing (210) 839-8923 and entering the participant passcode 9697984. In addition, a telephone replay will be available by dialing (203) 369-1211 through January 8, 2021,11:59 pm (EST).

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 and adjusted debit to EBITDAR. 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 constitute forward-looking statements that are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements typically use words such as “believe,” “anticipate,” “should,” “intend,” “plan,” “will,” “expect,” “estimate,” “project,” “positioned,” “strategy,” “seek,” “may,” “could” 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; cash flows; access to available and feasible financing; future stock repurchases; the impact of recessionary conditions; consumer debt levels; changes in laws or regulations; risks associated with self-insurance; war and the prospect of war, including terrorist activity; the impact of public health issues, such as the ongoing global pandemic of a novel strain of the coronavirus (“COVID-19”); inflation; the ability to hire, train and retain qualified employees; construction delays; the compromising of confidentiality, availability or integrity of information, including cyber-attacks; historic growth rate sustainability; downgrade of our credit ratings; damages to our reputation; challenges in international markets; failure or interruption of our information technology systems; origin and raw material costs of suppliers; disruption in our supply chain, due to public health epidemics or otherwise; impact of tariffs; anticipated impact of new accounting standards; and business interruptions. Certain of these risks and uncertainties are discussed in more detail in the “Risk Factors” section contained in Item 1A under Part 1 of the Company’s Annual Report on Form 10-K for the fiscal year ended August 29, 2020, and these Risk Factors should be read carefully. Forward-looking statements are not guarantees of future performance and actual results, developments and business decisions may differ from those contemplated by such forward-looking statements, and events described above and in the “Risk Factors” could materially and adversely affect our business. However, it should be understood that it is not possible to identify or predict all such risks and other factors that could affect these forward-looking statements. Forward-looking statements speak only as of the date made. Except as required by applicable law, we undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

Contact Information:
Financial: Brian Campbell at (901) 495-7005, brian.campbell@autozone.com
Media: David McKinney at (901) 495-7951, david.mckinney@autozone.com

                         
AutoZone's 1st Quarter Highlights - Fiscal 2021
             
Condensed Consolidated Statements of Operations
1st Quarter, FY2021
(in thousands, except per share data)
    GAAP Results    
    12 Weeks Ended   12 Weeks Ended    
    November 21, 2020   November 23, 2019    
             
Net sales $ 3,154,261     $ 2,793,038      
Cost of sales   1,478,644       1,291,970      
Gross profit   1,675,617       1,501,068      
Operating, SG&A expenses   1,060,392       1,001,045      
Operating profit (EBIT)   615,225       500,023      
Interest expense, net   46,179       43,743      
Income before taxes   569,046       456,280      
Income taxes(1)   126,613       105,942      
Net income $ 442,433     $ 350,338      
Net income per share:          
  Basic $ 19.05     $ 14.67      
  Diluted $ 18.61     $ 14.30      
Weighted average shares outstanding:          
  Basic   23,223       23,875      
  Diluted   23,778       24,493      
             
(1)First quarter Fiscal 2021 and 2020 include $7.6M and $1.5M in tax benefits from stock option exercises, respectively
                     
             
Selected Balance Sheet Information
(in thousands)
    November 21, 2020   November 23, 2019   August 29, 2020
Cash and cash equivalents $ 1,664,005     $ 158,089     $ 1,750,815  
Merchandise inventories   4,628,334       4,463,124       4,473,282  
Current assets   6,836,795       5,156,975       6,811,872  
Property and equipment, net   4,586,002       4,450,656       4,509,221  
Operating lease right-of-use assets   2,607,019       2,585,105       2,581,677  
Total assets   14,568,574       12,700,456       14,423,872  
Accounts payable   5,282,313       4,922,148       5,156,324  
Current liabilities   6,456,703       5,868,236       6,283,091  
Operating lease liabilities, less current portion   2,524,008       2,506,829       2,501,560  
Total debt   5,514,874       5,287,324       5,513,371  
Stockholders' deficit   (1,026,980 )     (1,776,090 )     (877,977 )
Working capital   380,092       (711,261 )     528,781  
             


                   
AutoZone's 1st Quarter Highlights - Fiscal 2021
               
Condensed Consolidated Statements of Operations
               
Adjusted Debt / EBITDAR          
(in thousands, except adjusted debt to EBITDAR ratio) Trailing 4 Quarters
      November 21, 2020
  November 23, 2019
Net income   $ 1,825,067     $ 1,616,153  
Add: Interest expense 203,601     189,541  
Income tax expense 504,213     422,648  
Adjusted EBIT 2,532,881     2,228,342  
               
Add: Depreciation and amortization 397,267     377,255  
Rent expense(1) 332,218     337,102  
Share-based expense 45,347     42,724  
Adjusted EBITDAR $ 3,307,713     $ 2,985,423  
               
Debt(2)   $ 4,045,681     $ 5,287,324  
Financing lease liabilities 232,921     195,663  
Add: Rent x 6(1) 1,993,308     2,022,612  
Adjusted debt $ 6,271,910     $ 7,505,599  
               
Adjusted debt to EBITDAR 1.9     2.5  
               
Adjusted Return on Invested Capital (ROIC)          
(in thousands, except ROIC)          
      Trailing 4 Quarters
      November 21, 2020
  November 23, 2019
Net income $ 1,825,067     $ 1,616,153  
Adjustments:          
Interest expense 203,601     189,541  
Rent expense(1) 332,218     337,102  
Tax effect(3) (115,737 )   (109,015 )
Deferred tax liabilities, net of repatriation tax -     (6,340 )
Adjusted after-tax return $ 2,245,149     $ 2,027,441  
               
Average debt(4)(5) $ 4,769,061     $ 5,182,565  
Average stockholders' deficit(5) (1,404,980 )   (1,666,486 )
Add: Rent x 6(1) 1,993,308     2,022,612  
Average financing lease liabilities(5) 214,601     170,863  
Invested capital $ 5,571,990     $ 5,709,554  
               
Adjusted After-Tax ROIC 40.3 %   35.5 %
               
(1)The table below outlines the calculation of rent expense and reconciles rent expense to total lease cost, per ASC 842, the most directly comparable GAAP financial measure, for the 52 weeks ended November 21, 2020 and 53 weeks ended November 23, 2019 (in thousands):
  Total lease cost, per ASC 842, for the 52 weeks ended November 21, 2020     $ 413,790  
  Less: Financing lease interest and amortization     (56,256 )
  Less: Variable operating lease components, related to insurance and common area maintenance for the 52 weeks ended November 21, 2020     (25,316 )
  Rent expense for the 52 weeks ended November 21, 2020     $ 332,218  
                 
  Total lease cost, per ASC 842, for the 12 weeks ended November 23, 2019     $ 95,840  
  Less: Financing lease interest and amortization     (14,041 )
  Less: Variable operating lease components, related to insurance and common area maintenance for the 12 weeks ended November 23, 2019     (6,207 )
  Rent expense for the 12 weeks ended November 23, 2019     $ 75,592  
  Add: Rent expense for the 41 weeks ended August 31, 2019 as previously reported prior to the adoption of ASC 842     261,510  
  Rent expense for the 53 weeks ended November 23, 2019     $ 337,102  
                 
               
(2)The Company ended Q1 FY21 with excess cash of $1.469B. Debt is presented net of excess cash
(3) Effective tax rate over trailing four quarters ended November 21, 2020 and November 23, 2019 is 21.6% and 20.7%, respectively
(4)Average debt for the trailing four quarters ended November 21,2020 is presented net of average excess cash of $668.0M
(5)All averages are computed based on trailing 5 quarter balances
               
               
Other Selected Financial Information
(in thousands)
      November 21, 2020
  November 23, 2019
Cumulative share repurchases ($ since fiscal 1998) $ 23,032,434     $ 21,873,206  
Remaining share repurchase authorization ($) 117,566     1,276,794  
               
Cumulative share repurchases (shares since fiscal 1998) 148,281     147,273  
               
Shares outstanding, end of quarter 22,855     23,655  
               
Depreciation and amortization 89,551     89,750  
               
Capital spending 113,036     101,407  
               


                                       
AutoZone's 1st Quarter Highlights - Fiscal 2021
Selected Operating Highlights
Condensed Consolidated Statements of Operations
                       
Store Count & Square Footage
                       
    12 Weeks Ended     12 Weeks Ended            
    November 21, 2020     November 23, 2019            
Domestic:
                   
  Beginning stores   5,885         5,772              
  Stores opened   39         18              
  Ending domestic stores   5,924         5,790              
                       
  Relocated stores   4         -              
                       
  Stores with commercial programs   5,043         4,917              
                       
  Square footage (in thousands)   38,823         37,910              
                       
Mexico:
                   
  Beginning stores   621         604              
  Stores opened   -         2              
  Ending Mexico stores   621         606              
                       
Brazil:
                   
  Beginning stores   43         35              
  Stores opened   2         2              
  Ending Brazil stores   45         37              
                       
Total
  6,590         6,433              
                       
  Square footage (in thousands)   43,781         42,695              
  Square footage per store   6,644         6,637              
                       
Sales Statistics                    
($ in thousands, except sales per average square foot)                    
    12 Weeks Ended     12 Weeks Ended     Trailing 4 Quarters     Trailing 4 Quarters (1)
Total AutoZone Stores (Domestic, Mexico and Brazil) November 21, 2020     November 23, 2019     November 21, 2020     November 23, 2019
  Sales per average store $ 472       $ 427       $ 1,960       $ 1,865  
  Sales per average square foot $ 71       $ 64       $ 295       $ 281  
                       
Total Auto Parts (Domestic, Mexico and Brazil)                    
  Total auto parts sales $ 3,101,597       $ 2,743,239       $ 12,764,287       $ 11,795,034  
  % Increase vs. LY   13.1 %       5.8 %       8.2 %       6.9 %
                       
Domestic Commercial                    
  Total domestic commercial sales $ 695,343       $ 621,483       $ 2,801,626       $ 2,637,406  
  % Increase vs. LY   11.9 %       13.6 %       6.2 %       16.2 %
                       
  Average sales per program per week $ 11.5       $ 10.6       $ 10.8       $ 10.3  
  % Increase vs. LY   9.2 %       10.1 %       5.3 %       10.5 %
                       
All Other, including ALLDATA                    
  All other sales $ 52,664       $ 49,799       $ 228,902       $ 220,013  
  % Increase vs. LY   5.8 %       3.1 %       4.0 %       (7.9 %)
                       
(1) Fiscal 2019 results include an additional week of sales of approximately $234.5M for Total Auto Parts, $51.3M for Domestic Commercial and $4.1M for All Other. Sales per average store and sales per average square foot benefited from the additional week by $37K and $6K, respectively
                       
    12 Weeks Ended     12 Weeks Ended            
    November 21, 2020     November 23, 2019            
Domestic same store sales   12.3 %       3.4 %            
                       
Inventory Statistics (Total Stores)                    
    as of     as of            
    November 21, 2020     November 23, 2019            
  Accounts payable/inventory   114.1 %       110.3 %            
                       
  ($ in thousands)                    
  Inventory $ 4,628,334       $ 4,463,124              
  Inventory per store   702         694              
  Net inventory (net of payables)   (653,979 )       (459,024 )            
  Net inventory / per store   (99 )       (71 )            
                       
    Trailing 5 Quarters            
    November 21, 2020     November 23, 2019            
  Inventory turns   1.3   x     1.3   x          
                       

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