AutoZone Inc. has reported net sales of $2.8 billion for its third quarter (12 weeks) ended May 9, 2020, a decrease of 0.1% from the third quarter of fiscal 2019 (12 weeks).
“Prior to a discussion of our third quarter results, it is important to address the impact the COVID-19 crisis has had on our business. While certain retailers closed their stores during this time, our stores remained open to service the motoring public. First and foremost, the health, safety and well-being of our AutoZoners and customers remains our most important concern. During these times our AutoZoners have made sure customers can safely and responsibly operate their vehicles and get back on the road. To better serve our customers and promote health and safety, we initially reduced the hours of operation in most of our stores, but subsequently have returned to more normal operating hours. We also increased the frequency of cleaning and disinfecting all locations, and introduced new service options for customers, such as curbside pickup. We have provided additional paid time off for both full-time and part-time eligible hourly AutoZoners to help them deal with the challenges they face as a result of COVID-19. During the third quarter, we experienced the most extreme fluctuations in sales, both negative and positive, in the Company’s more than 40-year history. Because of this extreme volatility and uncertainty around the continued effects of the virus and government and consumer responses, it is difficult for us to forecast short-term results with any degree of confidence. But our team has proven yet again that we can flex our business quickly in this dynamic environment, and we significantly enhanced our liquidity as previously announced,” said Bill Rhodes, chairman, president and CEO.
Third Quarter Results
Domestic same store sales, or sales for stores open at least one year, decreased 1% for the quarter. The quarter can best be described in three, four-week segments. The first four weeks were strong as both Retail and Commercial performed well, up mid-single digit same store sales. The next four weeks, the weeks COVID-19 had its first impact on business, AutoZone same store sales were down materially. Over the last four weeks, as federal stimulus checks began to flow through the economy, same store sales turned meaningfully positive.
For the quarter, gross profit, as a percentage of sales, was flat to last year at 53.6%. Operating expenses, as a percentage of sales, were 35.9% (versus 33.9% the same period last year), with deleverage primarily driven by the unplanned approximate $75 million of costs incurred in response to COVID-19.
Operating profit decreased 10.2% to $491.7 million compared to $547.5 million in the same period last year. Net income for the quarter decreased 15.5% to $342.9 million compared to $405.9 million in the same period last year, while diluted earnings per share decreased 10.0% to $14.39 per share from $15.99 per share in the year-ago quarter. The benefit from stock options was less favorable this third quarter, only increasing EPS by $0.05/share versus $0.51/share last year.
Under its share repurchase program, AutoZone repurchased 156 thousand shares of its common stock for $166.1 million during the third quarter, at an average price of $1,064 per share. As previously announced, the company has temporarily suspended its share repurchase program. At the end of the third quarter, the company had $796 million remaining under its current share repurchase authorization.