Press Release

MEMPHIS, Tenn., Feb. 27, 2018 (GLOBE NEWSWIRE) -- AutoZone, Inc. (NYSE:AZO) today reported net sales of $2.4 billion for its second quarter (12 weeks) ended February 10, 2018, an increase of 5.4% from the second quarter of fiscal 2017 (12 weeks).  Domestic same store sales, or sales for stores open at least one year, increased 2.2% for the quarter.

The Tax Cuts and Jobs Act of 2017 (“Tax Reform”) increased net income by $171.4 million, consisting of benefits from both revaluation of net deferred taxes of $136.7 million and a lower corporate tax rate of $59.5 million, partially offset by $24.8 million of tax expense related to repatriation taxes for accumulated earnings of foreign subsidiaries.  The Company also recorded approximately $193.2 million in intangible and other assets impairment charges within operating expenses related to its IMC and AutoAnything businesses.  Both of these businesses are being sold.

Net income for the quarter increased 22.1% over the same period last year to $289.5 million, while diluted earnings per share increased 28.5% to $10.38 per share from $8.08 per share in the year-ago quarter.  Adjusted for impairment charges, Tax Reform, excess tax benefits from option exercises and operating results from IMC and AutoAnything, adjusted net income for the quarter increased 3.9% over the same period last year to $236.3 million, while adjusted diluted earnings per share increased 9.3% to $8.47 per share from $7.75 per share in the year-ago quarter.  Adjusted operating profit, which excludes operating results from IMC and AutoAnything of ($5.2) million and the impairment charges, increased 3.8% to $403.5 million. 

For the quarter, gross profit, as a percentage of sales, was 52.9% (versus 52.7% for the same period last year).  The increase in gross margin was attributable to lower distribution costs (17 bps) and higher merchandise margins.  Operating expenses, as a percentage of sales, were 44.4% (versus 35.9% the same period last year) and included impairment charges of approximately $193.2 million, or 8.0% of sales.  Operating expenses before impairment charges, as a percentage of sales, were higher than last year primarily due to incentive compensation (16 bps), higher advertising (12 bps) and deleverage on occupancy costs (10 bps).

Under its share repurchase program, AutoZone repurchased 227 thousand shares of its common stock for $174.9 million during the second quarter, at an average price of $769 per share.  At the end of the second quarter, the Company had $296 million remaining under its current share repurchase authorization. 

The Company’s inventory increased 4.7% over the same period last year, driven by new stores and increased product placement.  Inventory per location was $671 thousand versus $665 thousand last year and $663 thousand last quarter.  Net inventory, defined as merchandise inventories less accounts payable, on a per location basis, was a negative $46 thousand versus negative $36 thousand last year and negative $52 thousand last quarter.

“I would like to thank and congratulate our entire organization for delivering another solid quarter of sales and earnings results. Our ongoing initiatives, which include enhanced inventory availability, commercial acceleration and omni-channel, are gaining traction and, as expected, our business improved due to the more harsh winter conditions we experienced in late December and January.  Based on the results of a strategic review of our business priorities, we have determined IMC and AutoAnything serve niche markets that are not core to our strategic priorities going forward and those two businesses are being sold.  We thank all the employees of IMC and AutoAnything for their contributions to our success and wish them well in the future.  Exiting these two businesses will allow us to intensify our focus on our core DIY and DIFM operations both domestically and internationally, which we continue to believe are very attractive markets.  As we continue to invest capital in our business, we will remain committed to our disciplined approach of increasing operating earnings and utilizing our capital effectively,” said Bill Rhodes, Chairman, President and Chief Executive Officer.

During the quarter ended February 10, 2018, AutoZone opened 35 new stores and closed one store in the U.S., opened three new stores in Mexico and opened two new stores in Brazil.  As of February 10, 2018, the Company had 5,514 stores in 50 states in the U.S., the District of Columbia and Puerto Rico, 532 stores in Mexico, 26 IMC branches and 16 stores in Brazil for a total count of 6,088.

AutoZone is the leading retailer and a leading distributor of automotive replacement parts and accessories in the United States. 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.  IMC branches carry an extensive line of original equipment quality import replacement parts.  AutoZone also sells the ALLDATA brand diagnostic and repair software through www.alldata.com. Additionally, we sell automotive hard parts, maintenance items, accessories, and non-automotive products through www.autozone.com, and accessories, performance and replacement parts through www.autoanything.com, and our commercial customers can make purchases through www.autozonepro.com and www.imcparts.net.  AutoZone does not derive revenue from automotive repair or installation.

AutoZone will host a conference call this morning, Tuesday, February 27, 2018, beginning at 10:00 a.m. (EST) to discuss its second quarter results.  Investors may listen to the conference call live and review supporting slides on the AutoZone corporate website, www.autozoneinc.com by clicking “Investor Relations,” “Conference Calls.”  The call will also be available by dialing (210) 839-8923.  A replay of the call and slides will be available on AutoZone’s website.  In addition, a replay of the call will be available by dialing (203) 369-1211 through Tuesday, March 6, 2018, at 11:59 p.m. (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 adjusted EPS, adjusted operating profit, adjusted net income, return on invested capital, adjusted debt, adjusted debt to EBITDAR and cash flow before share repurchases.  These adjustments include impairment charges, impact of excess tax benefits from option exercises, operating results from IMC and AutoAnything and adjustments related to the Tax Reform.  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 August 26, 2017, 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. 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. Actual results may materially differ from anticipated results.

Contact Information:
Financial: Brian Campbell at (901) 495-7005, brian.campbell@autozone.com
Media: Ray Pohlman at (866) 966-3017, ray.pohlman@autozone.com