MEMPHIS, TN — AutoZone has reported sales of $1.360 billion for its third fiscal quarter, which ended on May 8. That’s an increase of 5.6 percent from fiscal 2003. Same store sales, or sales for domestic stores open at least one year, increased 2 percent for the quarter, the company said.
Retail same store sales were up 1 percent while commercial same store sales were up 10 percent. Gross profit, as a percentage of sales, for the quarter improved by 3.2 percentage points while operating expenses, as a percentage of sales, increased by 2 percentage points. This resulted in an operating margin of 18.5 percent, up 1.3 percentage points from last year. Operating profit increased 13.3 percent over the prior year.
Net income for the quarter increased by 13.8 percent over the same period last year to $143.4 million, and diluted earnings per share, reflecting net income and the benefit of the company share repurchase program, increased 29.4 percent to $1.68 per share from $1.30 per share reported in the year-ago quarter. Return on invested capital for the trailing four quarters increased to 25.1 percent from 22.3 percent the previous year.
For the fiscal year-to-date period (36 weeks), sales were $3.801 billion, an increase of 4.8 percent from the prior year, with a same store sales increase of 2 percent on flat growth in retail same store sales and 12 percent growth in commercial same store sales. Year-to-date net income increased 15 percent to $356.8 million, while diluted earnings per share for the period increased 30.2 percent to $4.06 from $3.12.
Under its ongoing share repurchase program, AutoZone repurchased 1.6 million shares of its common stock for $133 million during the third quarter. Since 1998, cumulative share repurchases have totaled $3.4 billion, or 78.3 million shares at an average price of $42.89 per share.
For the quarter, gross profit, as a percentage of sales, was 49.7 percent while operating expenses, as a percentage of sales, were 31.2 percent. During the quarter, gross profit was affected by 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). AutoZone adopted the new accounting effective January 1, 2003. Both this year’s and last year’s quarters were affected by this change in classification.
For the twelve weeks ending May 8, 2004 and May 10, 2003, this resulted in a change in classification of vendor funding from operating expenses to cost of goods sold of $34.4 million and $15.6 million, respectively. Additionally, during this year’s quarter the company experienced a gain from warranty negotiations of $10.6 million or 8 cents per share while last year’s quarter experienced a one-time $4.7 million or 3 cents per share gain from the sale of the TruckPro business unit. Excluding the impact of these events, gross margin for the quarter would have been 46.4 percent (versus 45.5 percent last year) and operating selling, general and administrative expenses as a percent of sales would have been 28.7 percent (versus 28.4 percent last year). This increase in operating selling, general and administrative expenses as a percent of sales primarily reflects costs associated with the company’s initiative to refresh 81 additional stores during the quarter and to open 151 incremental commercial programs.
AutoZone reduced its gross inventory levels (the reported balance sheet inventory, which is total inventory less Pay On Scan inventory) per store as of May 8, to $447,000 from $469,000 thousand last year. Net inventory, defined as gross inventory less accounts payable, declined on a per store level to $82,000 from $128,000 last year. For the quarter, the company reflected $61.3 million in Pay On Scan inventory.
For more information about AutoZone, go to: www.autozone.com.
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