AutoZone has reported net sales of $3.2 billion for its first quarter (12 weeks) ended Nov. 21, 2020, an increase of 12.9% from the first quarter of fiscal 2020 (12 weeks). Domestic same store sales, or sales for stores open at least one year, increased 12.3% for the quarter.
“As the COVID-19 global pandemic continues, our primary focus has been and continues to be the health, wellness and safety of our customers and AutoZoners. Last week, we shared with all eligible AutoZoners that we have again made some significant benefit changes to encourage personal responsibility. Most notably, we will offer another week of ‘emergency time-off,’ and we will allow an extended carryover of paid time off for much of the new calendar year. Combined, these enhanced benefits will cost roughly $50 million in our second quarter, but as I told our team last week, it’s an investment in them and the well-being of our customers and their fellow AutoZoners,” said Bill Rhodes, chairman, president and CEO.
For the quarter, gross profit, as a percentage of sales, was 53.1%, a decrease of 62 basis points versus the prior year. The decrease in gross margin was attributable to one-time pandemic related charges, increased loyalty program participation resulting from increased purchase frequency from existing customers, and a shift in mix. Operating expenses, as a percentage of sales, were 33.6% (versus 35.8% for last year’s quarter), with leverage primarily due to higher sales volumes.
Operating profit increased 23% to $615.2 million. Net income for the quarter increased 26.3% over the same period last year to $442.4 million, while diluted earnings per share increased 30.1% to $18.61 per share from $14.30 per share in the year-ago quarter. The increase in net income was driven by strong topline growth.
AutoZone repurchased 584,379 shares of its common stock for $678.3 million during the first quarter, at an average price of $1,161 per share. At the end of the first quarter, the Company had $117.6 million remaining under its current share repurchase authorization.
The Company’s inventory increased 3.7% over the same period last year, driven by new stores and improved product assortment. Net inventory, defined as merchandise inventories less accounts payable, on a per store basis, was approximately negative $99 thousand versus negative $71 thousand last year and negative $104 thousand last quarter.
“Our team, particularly those in our stores and distribution centers, have not only provided exceptional service to our customers, but they have also delivered very impressive results again. Together, as 1Team, we delivered double digit same store sales growth, EBIT growth over 20% and earnings per share growth of 30%, all historically significant performances. And, both our domestic Retail and Commercial sales grew more than 10 percent and our market share growth in both sectors is growing substantially more than industry growth rates. While our sales have certainly been aided by the COVID-19 pandemic related government stimulus and consumer behavior changes, we have continued to execute on our strategies to improve inventory availability including expanding our Hub and Mega-Hub networks. We are also leveraging technology to improve our service capabilities and efficiency and further penetrating the Commercial market. Finally, after pausing our share repurchase program due to unprecedented uncertainty, we have returned to leveraging our consistently strong excess free cash flow, after healthy investments in growing the enterprise, to return cash to our shareholders through our stock buyback program,” said Rhodes.