MEMPHIS, TN — AutoZone has reported sales of $1.836 billion for its fourth fiscal quarter (16 weeks), which ended on Aug. 28, an increase of 0.3 percent from fiscal 2003. Same store sales, or sales for domestic stores open at least one year, decreased 3 percent for the quarter. Gross profit, as a percentage of sales, for the quarter improved by 1.6 percentage points, while operating expenses, as a percentage of sales, increased by 1.5 percentage points. This resulted in an operating margin of 19.8 percent, up 0.1 percentage points from last year. Operating profit increased 1 percent over the prior year.
Net income for the quarter increased by 0.9 percent over the same period last year to $209 million, and diluted earnings per share, reflecting net income and the benefit of the company share repurchase program, increased 11.2 percent to $2.53 per share from $2.27 per share reported in the year-ago quarter.
Return on invested capital for the trailing four quarters increased to 25.1 percent from 23.4 percent the previous year.
For the fiscal year, which ended on August 28, sales were $5.637 billion, an increase of 3.3 percent from the prior year, while same store sales were flat. Operating profit increased 8.8 percent on an operating margin of 17.7 percent. Year-to-date net income increased 9.4 percent to $566 million, while diluted earnings per share for the period increased 22.8 percent to $6.56 from $5.34.
Under its ongoing share repurchase program, AutoZone repurchased 3.9 million shares of its common stock for $318 million during the fourth quarter. During the fiscal year ended Aug. 28, 2004 share repurchases totaled $848 million, or 10.2 million shares at an average price of $83.20 per share.
For the quarter, gross profit, as a percentage of sales, was 49.2 percent, while operating expenses, as a percentage of sales, were 29.4 percent. AutoZone has adopted the accounting required by the Emerging Issues Task Force Issue 02-16, “Accounting by a Customer (including a Reseller) for Cash Consideration Received from a Vendor” (EITF Issue 02-16), effective Jan. 1, 2003. As a result, both this year’s and last year’s fourth quarters were affected by this change in classification. For the 16 weeks ended Aug. 28, 2004 and Aug. 30, 2003, this resulted in a change in classification of vendor funding from operating expenses to cost of goods sold of $52.7 million and $37 million, respectively. Additionally, during this year’s fourth quarter the company experienced a gain from warranty negotiations of $15.5 million or $0.12 per share, while last year’s fourth quarter reflected a gain from warranty negotiations of $8.7 million or $0.06 per share as well as $4.6 million or $0.03 per share gain from the reversal of a restructuring reserve the company established back in fiscal 2001 primarily for the closure of AutoZone stores. Excluding the impact of these events, gross margin for the quarter would have been 45.5 percent (versus 45.5 percent last year) and operating selling, general and administrative expenses as a percent of sales would have been 26.5 percent (versus 26.1 percent last year). The opening of 84 new AutoZone stores and the company’s initiative to refresh 71 additional stores during the quarter contributed to the increase in operating selling, general and administrative expenses as a percent of sales.
The company reduced its gross inventory levels (the reported balance sheet inventory, which is total inventory less supplier owned Pay-On-Scan inventory) per store as of Aug. 28, 2004, to $448,000 from $462,000 last year. Net inventory, defined as gross inventory less accounts payable, declined on a per store level to $38,000 from $46,000 last year. As of Aug. 28, 2004, the company achieved $147 million in Pay-On-Scan inventory.
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