AutoZone has reported net sales of $3.6 billion for its fourth quarter (16 weeks) ended Aug. 25, 2018, an increase of 1.3 percent from the fourth quarter of fiscal 2017 (16 weeks). Domestic same store sales, or sales for stores open at least one year, increased 2.2 percent for the quarter.
Net income for the quarter decreased 7.7 percent over the same period last year to $400.3 million, while diluted earnings per share decreased 1.6 percent to $15.02 per share from $15.27 per share in the year-ago quarter.
As previously disclosed, during the quarter AutoZone terminated its qualified and non-qualified pension plans that had been frozen since fiscal 2003. Adjusted for the charges related to the termination of the pension plans of $93.7 million, net of tax benefit, adjusted net income for the quarter increased 13.8 percent over the same period last year to $494 million, while adjusted diluted earnings per share increased 21.4 percent to $18.54 per share from $15.27 per share in the year-ago quarter. Net income and diluted earnings per share benefitted from a lower effective income tax rate, primarily due to the recent tax reform. Adjusted operating profit, which excludes the charges related to the termination of the pension plans of $130.3 million, increased 2 percent to $721.5 million.
For the quarter, gross profit, as a percentage of sales, was 53.6 percent (versus 52.8 percent the same period last year). The retailer said this increase in gross margin was attributable to the impact of the sale of two business units completed during the year (+72 bps) and higher merchandise margins, partially offset by higher supply chain costs.
For the fiscal year ended Aug. 25, 2018, sales were $11.2 billion, an increase of 3.1 percent from the prior year, while domestic same store sales were up 1.8 percent for the year. Gross profit, as a percentage of sales, was 53.2 percent (versus 52.7 percent the same period last year).
For fiscal 2018, net income increased 4.4 percent to $1.338 billion and diluted earnings per share for the year increased 10.7 percent to $48.77 from $44.07. Net income and diluted earnings per share benefitted from a lower effective income tax rate, primarily due to the recent tax reform. Return on invested capital finished the year at 32.1 percent, while full-year cash flow before share repurchases and changes in debt was $1.596 billion.
Under its share repurchase program, AutoZone repurchased 974,000 shares of its common stock for $665 million during the fourth quarter, at an average price of $683 per share. For the fiscal year, the company repurchased 2.4 million shares of its common stock for a record $1.592 billion, at an average price of $664 per share. At year-end, the company had $232 million remaining under its current share repurchase authorization.
The company’s inventory increased 1.6 percent 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 at the end of the year was $636,000 versus $644,000 last year and $658,000 last quarter. Net inventory, defined as merchandise inventories less accounts payable, on a per location basis, was a negative $75,000 at the end of the year versus negative $48,000 last year and last quarter.
Commenting on the company’s results, Bill Rhodes, Chairman, president and CEO, noted that expected sales increases, particularly in the Rust Belt, materialized as planned but he still sees more room for improvement. “Additionally, our commercial sales performance accelerated nicely in the quarter growing 8.8 percent. While these were positive developments, we believe we have further opportunities to improve our operations and results. As we are investing to grow, we will remain committed to our disciplined approach to increasing operating earnings and utilizing our capital effectively.”
In addition to reporting its quarterly numbers, AutoZone also announced today a new next-day home delivery program. The retailer says it is making local market inventory – up to 100,000 different parts and accessories – available for delivery to the customers’ doorstep the next day. And, for most customers, the order can be placed as late as 10 p.m. for next-day delivery. After a successful pilot program, AutoZone parts and accessories are now available for next-day delivery in 83 markets, covering roughly 80 percent of the U.S. population.
“Listening to customers and providing efficient and faster service is what we do, and we’re excited to find another way to deliver on that promise,” said Rhodes. “Our industry-leading products and customer service now come with industry-leading shipping options. This is an incredibly unique offering.”
Online purchases are a growing segment for AutoZone. Leveraging an integrated order management system, a growing store footprint and drawing orders from local inventory allows the company to offer this new feature to customers.
Additional information about the next day shipping option can be found at autozone.com.
