Strategy

New Store Openings Boost Autozone’s Profit

The auto parts retailer's earnings per share rose 12.2% in Q4, its 40th straight quarter of double digit growth.
Matthew HellerSeptember 22, 2016

Autozone increased same-store sales in the fourth quarter and its earnings beat analysts’ estimates, reaping the benefits of opening new stores and boosting inventory.

The auto parts retailer on Thursday said sales at domestic stores open at least a year rose 1% while net sales rose 3.3% to $3.4 billion. Net income increased 6.4% to $426.8 million, with earnings per share rising 12.2% to $14.30.

The consensus estimates from Thomson Reuters called for $14.25 in earnings per share on revenue of $3.43 billion. Autozone has now reported double digit earnings per share growth for 40 straight quarters.

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During the fourth quarter, the company opened 71 new stores in the U.S. and 25 in Mexico. As The Wall Street Journal reports, it has also been working to increase inventory and selection in part by opening so-called mega hub locations and making more frequent deliveries to stores.

“The ongoing rollout of our inventory availability initiatives, including expanding our multi-deliveries per week to stores and opening mega hub locations, has gone very well,” Autozone CEO Bill Rhodes said in a news release.

“We expect to continue with these initiatives in 2017 while expanding our supply chain network with the already announced planned openings of two or three new domestic distribution centers over the next few years,” he added.

Autozone’s gross margin edged up to 52.8% in the fourth quarter from 52.5% a year earlier, as lower acquisition costs were partly offset by higher supply chain costs associated with the inventory initiatives. Inventory increased 6.1%, with inventory per location up to $625 thousand compared to $610 thousand last year.

Rival Advance Auto Parts posted a worse-than-expected decline in profit in its latest quarter as weak same-store sales continued to drag on the top line.

In trading Thursday, Autozone shares rose 0.3% to $749.15. Under its share repurchase program, the company bought $370 million worth of its stock during the fourth quarter.

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