AutoZone 2nd Quarter Same Store Sales Increase 5.3%; EPS Increases to $24.64

Feb 28, 2023

MEMPHIS, Tenn., Feb. 28, 2023 (GLOBE NEWSWIRE) -- AutoZone, Inc. (NYSE: AZO) today reported net sales of $3.7 billion for its second quarter (12 weeks) ended February 11, 2023, an increase of 9.5% from the second quarter of fiscal 2022 (12 weeks). Domestic same store sales, or sales for stores open at least one year, increased 5.3% for the quarter.

“We are proud to report solid same store sales growth on top of last year’s 13.8%. We could not have achieved these results without phenomenal contributions from across the organization. Once again, our AutoZoners’ efforts generated double digit domestic Commercial growth and single digit domestic Retail sales growth. We continue to believe the initiatives we have in place position us well for the remainder of our fiscal year,” said Bill Rhodes, Chairman, President and Chief Executive Officer.

For the quarter, gross profit, as a percentage of sales, was 52.3%, a decrease of 69 basis points versus the prior year. The decrease in gross margin was impacted by a 27 basis point ($10 million) non-cash LIFO charge driven primarily by freight costs. The remaining deleverage was driven by supply chain costs and accelerated growth in our Commercial business. Operating expenses, as a percentage of sales, were 34.1% versus last year at 34.4%.

Operating profit increased 6.9% to $670.0 million. Net income for the quarter increased 1.0% over the same period last year to $476.5 million, while diluted earnings per share increased 10.5% to $24.64 from $22.30 in the year-ago quarter.

Under its share repurchase program, AutoZone repurchased 372 thousand shares of its common stock for $906.0 million during the second quarter, at an average price of $2,434 per share. At the end of the second quarter, the Company had $1.8 billion remaining under its current share repurchase authorization.

The Company’s inventory increased 13.9% over the same period last year, driven by inflation and its growth initiatives. Net inventory, defined as merchandise inventories less accounts payable, on a per store basis, was negative $227 thousand versus negative $198 thousand last year and negative $249 thousand last quarter.

“We remain committed to providing the best place for our customers to shop while being an exceptional place for our AutoZoners to build their careers. For the remainder of fiscal 2023, we will be laser focused on relentless execution, and we will continue to focus our capital on projects that meet or exceed our return on capital targets. We will take nothing for granted as we will continue to focus on our long-term approach of increasing operating earnings and free cash flows while using our balance sheet effectively,” said Rhodes.

During the quarter ended February 11, 2023, AutoZone opened 30 new stores in the U.S., one in Mexico and five in Brazil. As of February 11, 2023, the Company had 6,226 stores in the U.S., 707 in Mexico and 81 in Brazil for a total store count of 7,014.
        
AutoZone is the leading retailer and distributor of automotive replacement parts and accessories in the Americas. Each 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 the majority of our stores in Mexico and Brazil. AutoZone also sells the ALLDATA brand automotive diagnostic, repair and shop management software through www.alldata.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 services.

AutoZone will host a conference call this morning, Tuesday, February 28, 2023, beginning at 10:00 a.m. (ET) to discuss its second 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 (888) 506-0062, passcode AUTOZONE. In addition, a telephone replay will be available by dialing (877) 481-4010, replay passcode 47607 through March 14, 2023.

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 debt 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. 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 herein 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, due to changes in fuel prices, miles driven or otherwise; 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 coronavirus (“COVID-19”) pandemic; inflation; the ability to hire, train and retain qualified employees; construction delays; failure or interruption of our information technology systems; issues relating to the confidentiality, integrity or availability of information, including due to cyber-attacks; historic growth rate sustainability; downgrade of our credit ratings; damage to our reputation; challenges in international markets; origin and raw material costs of suppliers; inventory availability; disruption in our supply chain; impact of tariffs; 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 year ended August 27, 2022, 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. 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 2nd Quarter Highlights - Fiscal 2023      
               
Condensed Consolidated Statements of Operations          
2nd Quarter, FY2023              
(in thousands, except per share data)              
    GAAP Results      
    12 Weeks Ended   12 Weeks Ended      
    February 11, 2023   February 12, 2022      
               
Net sales   $ 3,690,982     $ 3,369,750        
Cost of sales     1,760,979       1,584,524        
Gross profit     1,930,003       1,785,226        
Operating, SG&A expenses     1,260,026       1,158,466        
Operating profit (EBIT)     669,977       626,760        
Interest expense, net     65,609       42,471        
Income before taxes     604,368       584,289        
Income tax expense     127,824       112,534        
Net income   $ 476,544     $ 471,755        
Net income per share:              
Basic   $ 25.48     $ 23.00        
Diluted   $ 24.64     $ 22.30        
Weighted average shares outstanding:              
Basic     18,705       20,513        
Diluted     19,337       21,158        
               
               
               
Year-To-Date 2nd Quarter, FY2023              
(in thousands, except per share data)              
    GAAP Results      
    24 Weeks Ended   24 Weeks Ended      
    February 11, 2023   February 12, 2022      
               
Net sales   $ 7,676,049     $ 7,038,653        
Cost of sales     3,751,424       3,328,267        
Gross profit     3,924,625       3,710,386        
Operating, SG&A expenses     2,531,615       2,329,141        
Operating profit (EBIT)     1,393,010       1,381,245        
Interest expense, net     123,332       85,755        
Income before taxes     1,269,678       1,295,490        
Income taxes     253,816       268,500        
Net income   $ 1,015,862     $ 1,026,990        
Net income per share:              
Basic   $ 53.87     $ 49.49        
Diluted   $ 52.12     $ 48.03        
Weighted average shares outstanding:              
Basic     18,856       20,750        
Diluted     19,491       21,383        
               
               
Selected Balance Sheet Information              
(in thousands)              
    February 11, 2023   February 12, 2022   August 27, 2022  
               
Cash and cash equivalents   $ 301,286     $ 239,423     $ 264,380    
Merchandise inventories     5,731,255       5,031,222       5,638,004    
Current assets     6,794,805       5,903,770       6,627,984    
Property and equipment, net     5,236,129       4,879,079       5,170,419    
Operating lease right-of-use assets     2,943,844       2,743,771       2,918,817    
Total assets     15,545,142       14,078,473       15,275,043    
Accounts payable     7,321,551       6,378,606       7,301,347    
Current liabilities     8,614,618       7,684,645       8,588,393    
Operating lease liabilities, less current portion     2,854,227       2,641,555       2,837,973    
Total debt     7,042,302       5,840,884       6,122,092    
Stockholders' deficit     (4,184,170 )     (3,137,477 )     (3,538,913 )  
Working capital     (1,819,813 )     (1,780,875 )     (1,960,409 )  
               



AutoZone's 2nd Quarter Highlights - Fiscal 2023                      
                       
Condensed Consolidated Statements of Operations                     
                       
Adjusted Debt / EBITDAR                      
(in thousands, except adjusted debt to EBITDAR ratio)   Trailing 4 Quarters              
    February 11, 2023   February 12, 2022              
Net income   $ 2,418,476     $ 2,408,925                
Add: Interest expense     229,215       188,901                
Income tax expense     634,803       630,954                
EBIT     3,282,494       3,228,780                
                       
Add: Depreciation and amortization     465,905       422,938                
Rent expense(1)     394,298       354,410                
Share-based expense     82,253       62,672                
EBITDAR   $ 4,224,950     $ 4,068,800                
                       
Debt   $ 7,042,302     $ 5,840,884                
Financing lease liabilities     290,858       272,719                
Add: Rent x 6(1)     2,365,788       2,126,460                
Adjusted debt   $ 9,698,948     $ 8,240,063                
                       
Adjusted debt to EBITDAR     2.3       2.0                
                       
Adjusted Return on Invested Capital (ROIC)                      
(in thousands, except ROIC)                      
    Trailing 4 Quarters              
    February 11, 2023   February 12, 2022              
Net income   $ 2,418,476     $ 2,408,925                
Adjustments:                      
Interest expense     229,215       188,901                
Rent expense(1)     394,298       354,410                
Tax effect(2)     (129,691 )     (113,008 )              
Adjusted after-tax return   $ 2,912,298     $ 2,839,228                
                       
Average debt(3)   $ 6,278,213     $ 5,433,252                
Average stockholders' deficit(3)     (3,617,143 )     (2,069,346 )              
Add: Rent x 6(1)     2,365,788       2,126,460                
Average financing lease liabilities(3)     294,337       255,497                
Invested capital   $ 5,321,195     $ 5,745,863                
                       
Adjusted After-Tax ROIC     54.7 %     49.4 %              
                       
(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 trailing four quarters ended February 11, 2023 and February 12, 2022              
                       
    Trailing 4 Quarters              
(in thousands)   February 11, 2023   February 12, 2022              
Total lease cost, per ASC 842, for the trailing four quarters   $ 498,970     $ 442,950                
Less: Financing lease interest and amortization     (77,302 )     (62,607 )              
Less: Variable operating lease components, related to insurance and common area maintenance     (27,370 )     (25,933 )              
Rent expense for the trailing four quarters   $ 394,298     $ 354,410                
                           
                       
(2) Effective tax rate over trailing four quarters ended February 11, 2023 and February 12, 2022 was 20.8%              
(3)All averages are computed based on trailing five quarter balances              
                       
Other Selected Financial Information                      
(in thousands)                      
    February 11, 2023   February 12, 2022              
Cumulative share repurchases ($ since fiscal 1998)   $ 31,898,212     $ 28,192,426                
Remaining share repurchase authorization ($)     1,751,788       957,574                
                       
Cumulative share repurchases (shares since fiscal 1998)     153,273       151,586                
                       
Shares outstanding, end of quarter     18,467       19,967                
                       
                       
    12 Weeks Ended   12 Weeks Ended       24 Weeks Ended   24 Weeks Ended  
    February 11, 2023   February 12, 2022       February 11, 2023   February 12, 2022  
                       
Depreciation and amortization   $ 113,711     $ 99,692         $ 222,964   $ 199,282  
                       
Cash flow from operations     354,474       361,816           1,148,061     1,139,746  
                       
Capital spending     144,837       105,874           259,234     208,143  
                       



AutoZone's 2nd Quarter Highlights - Fiscal 2023                        
Condensed Consolidated Statements of Operations                    
Selected Operating Highlights                        
                         
Store Count & Square Footage                        
                         
    12 Weeks Ended     12 Weeks Ended     24 Weeks Ended     24 Weeks Ended  
    February 11, 2023     February 12, 2022     February 11, 2023     February 12, 2022  
Domestic:                        
Beginning stores     6,196         6,066         6,168         6,051    
Stores opened     30         26         58         41    
Stores closed     -         (1 )       -         (1 )  
Ending domestic stores     6,226         6,091         6,226         6,091    
                         
Relocated stores     1         1         4         4    
                         
Stores with commercial programs     5,500         5,233         5,500         5,233    
                         
Square footage (in thousands)     41,103         40,037         41,103         40,037    
                         
Mexico:                        
Beginning stores     706         666         703         664    
Stores opened     1         3         4         5    
Ending Mexico stores     707         669         707         669    
                         
Brazil:                        
Beginning stores     76         53         72         52    
Stores opened     5         2         9         3    
Ending Brazil stores     81         55         81         55    
                         
Total     7,014         6,815         7,014         6,815    
                         
Square footage (in thousands)     46,982         45,433         46,982         45,433    
Square footage per store     6,698         6,667         6,698         6,667    
                         
Sales Statistics                        
($ in thousands, except sales per average square foot)                        
    12 Weeks Ended     12 Weeks Ended     Trailing 4 Quarters     Trailing 4 Quarters  
Total AutoZone Stores (Domestic, Mexico and Brazil) February 11, 2023     February 12, 2022     February 11, 2023     February 12, 2022  
Sales per average store   $ 518       $ 486       $ 2,399       $ 2,282    
Sales per average square foot   $ 77       $ 73       $ 359       $ 343    
                         
Total Auto Parts (Domestic, Mexico and Brazil)                        
Total auto parts sales   $ 3,623,110       $ 3,306,223       $ 16,590,483       $ 15,332,148    
% Increase vs. LY     9.6%         15.6%         8.2%         16.5%    
                         
Domestic Commercial                        
Total domestic commercial sales   $ 954,584       $ 843,889       $ 4,475,546       $ 3,755,003    
% Increase vs. LY     13.1%         32.1%         19.2%         30.2%    
                         
Average sales per program per week   $ 14.5       $ 13.5       $ 16.0       $ 14.0    
% Increase vs. LY     7.4%         28.6%         14.3%         26.1%    
                         
All Other, including ALLDATA                        
All other sales   $ 67,872       $ 63,527       $ 299,144       $ 271,012    
% Increase vs. LY     6.8%         24.3%         10.4%         17.1%    
                         
               
    12 Weeks Ended     12 Weeks Ended     24 Weeks Ended     24 Weeks Ended  
    February 11, 2023     February 12, 2022     February 11, 2023     February 12, 2022  
Domestic same store sales     5.3%         13.8%         5.5%         13.7%    
                         
Inventory Statistics (Total Stores)                        
    as of     as of              
    February 11, 2023     February 12, 2022              
Accounts payable/inventory     127.7%         126.8%                
                         
($ in thousands)                        
Inventory   $ 5,731,255       $ 5,031,222                
Inventory per store     817         738                
Net inventory (net of payables)     (1,590,296 )       (1,347,384 )              
Net inventory / per store     (227 )       (198 )              
                         
    Trailing 5 Quarters              
    February 11, 2023     February 12, 2022              
Inventory turns     1.5 x     1.6 x            
                         

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Source: AutoZone, Inc.