AutoZone recently reported net sales of $4 billion for its fourth quarter (17 weeks) ended Aug. 31, 2019, an increase of 12.1% from the fourth quarter of fiscal 2018 (16 weeks). Excluding sales from the additional week included in this year’s quarter, adjusted sales were up 5.4%. Domestic same store sales, or sales for stores open at least one year, increased 3% for the quarter. Same store sales are computed on a 16-week basis.
Net income for the quarter increased $164.9 million, or 41.2% over the same period last year to $565.2 million, while diluted earnings per share increased 50.4% to $22.59 per share from $15.02 per share in the year-ago quarter. Operating profit increased 32.1% to $780.8 million. Excluding the additional week in the fourth quarter of 2019 and the pension plan termination costs which occurred in the fourth quarter of 2018, adjusted net income for the quarter increased 6.1% over the previous year’s quarter to $524.3 million, while adjusted diluted earnings per share increased 13.0% to $20.95 per share. Adjusted operating profit increased 0.5% to $725 million.
For the fiscal year ended Aug. 31, 2019, sales were $11.9 billion, an increase of 5.7% from the prior year, while domestic same store sales were up 3% for the year. Same store sales are computed on a 52-week basis. Gross profit, as a percentage of sales, was 53.7% (versus 53.2% the same period last year). The increase in gross margin was primarily attributable to the impact of the sale of two businesses completed in the prior year (37 basis points). Operating expenses, as a percentage of sales, were 35.0% (versus 37.1% the same period last year) primarily due to last year’s impairment charges of $193.2 million related to the sale of two businesses and pension plan termination charges of $130.3 million, partially offset by increased domestic store payroll (66 bps) in 2019.
For fiscal 2019, net income increased 20.9% to $1.6 billion and diluted earnings per share for the year increased 30.1% to $63.43 from $48.77. Net income and diluted earnings per share benefitted from an additional week of sales in the current year and the prior year’s impairment and pension termination charges. Return on invested capital finished the year at 35.7%, while full year cash flow before share repurchases and changes in debt was $1.759 billion.
Under its share repurchase program, AutoZone repurchased 634,000 shares of its common stock for $692 million during the fourth quarter, at an average price of $1,091 per share. For the fiscal year, the company repurchased 2.2 million shares of its common stock for $2.005 billion, at an average price of $919 per share. At year end, the company had $476.8 million remaining under its current share repurchase authorization.
AutoZone’s inventory increased 9.5% over the same period last year, driven by increased product placement and new stores. Inventory per store was $674,000 versus $636,000 last year and $688,000 last quarter. Net inventory, defined as merchandise inventories less accounts payable, on a per location basis, was a negative $85,000 versus negative $75,000 last year and negative $58,000 last quarter.
“I would like to congratulate and thank our entire organization for the solid performance they delivered in our fourth quarter and fiscal year. Our customer service and trustworthy advice are what continue to differentiate us across our industry, and our AutoZoners’ passion to deliver superior service has allowed us to consistently deliver strong financial results,” said Bill Rhodes, chairman, president and CEO. “For the year, we delivered several impressive accomplishments which include a record $11.9 billion in total sales, three percent same store sales growth, domestic Commercial sales grew by 13.4% (on a 52-week basis), the opening of 209 stores globally and 152 additional domestic Commercial programs, and repurchasing a record $2 billion of our common stock.
“I am especially proud to say our organization delivered on the major initiatives we set for ourselves at the beginning of the year: we invested in incremental wages for our most tenured hourly store AutoZoners’ and we accelerated our investment in information technology with specific emphasis on expanding our Omnichannel initiatives, which contributed to us gaining market share across our industry. We also improved our return on invested capital from the prior year of 32.1% to 35.7%. As we start a new fiscal year, we promise to remain committed to delivering exceptional customer service while growing our Retail, Commercial and International businesses. We will maintain our disciplined approach to growing operating earnings and utilizing our capital effectively,” said Rhodes.
