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AutoZone 2nd Quarter Same Store Sales Increase 15.2%; EPS Increases to $14.93

AutoZone, Inc.
·15-min read

MEMPHIS, Tenn., March 02, 2021 (GLOBE NEWSWIRE) -- AutoZone, Inc. (NYSE: AZO) today reported net sales of $2.9 billion for its second quarter (12 weeks) ended February 13, 2021, an increase of 15.8% from the second quarter of fiscal 2020 (12 weeks). Domestic same store sales, or sales for stores open at least one year, increased 15.2% for the quarter.

For the quarter, gross profit, as a percentage of sales, was 53.6%, a decrease of 77 basis points versus the prior year. The decrease in gross margin was attributable to increased supply chain costs, pricing initiatives, accelerated loyalty program participation and a shift in mix. Operating expenses, as a percentage of sales, improved to 37.0% versus 38.1% for last year’s quarter, with leverage primarily due to higher sales volumes, offset by additional emergency time-off benefits and other pandemic-related expenses totaling approximately $40 million (137 basis points).

Operating profit increased 18.1% to $481.8 million. Net income for the quarter increased 15.6% over the same period last year to $345.9 million, while diluted earnings per share increased 20.5% to $14.93 per share from $12.39 per share in the year-ago quarter. The increase in net income was driven by strong topline growth.

AutoZone repurchased 752,004 shares of its common stock for $900 million during the second quarter, at an average price of $1,197 per share. At the end of the second quarter, the Company had $717.6 million remaining under its current share repurchase authorization.

The Company’s inventory increased 2.8% 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 $93 thousand versus negative $41 thousand last year and negative $99 thousand last quarter.

“This quarter, we were again able to deliver exceptionally strong same store sales and earnings growth, and many performance metrics remained at historically high levels. While our strong (DIY) sales have been aided by government stimulus and changes to consumer behavior as a result of the pandemic, our growth initiatives continue to deliver strong share gains with both DIY and Commercial customers. In Commercial, our business was up 15% this quarter as the investments we are making in pricing, service and assortment are strengthening our competitive position in this large, fragmented market. We intend to accelerate our Company’s historical growth rate as we increase our penetration in this market.

Our outstanding performance is also driven by the exceptional and heroic efforts of our AutoZoners, particularly those in our stores and distribution centers who have been there every day for our customers during these extraordinary times. We recently announced a financial incentive for our employees to receive the COVID-19 vaccine and we will continue to invest appropriately in a safe and productive work environment for our people,” said Bill Rhodes, Chairman, President and Chief Executive Officer.

During the quarter ended February 13, 2021, AutoZone opened 27 new stores in the U.S., seven in Mexico and one in Brazil. As of February 13, 2021, the Company had 5,951 stores in the U.S., 628 stores in Mexico, and 46 stores in Brazil for a total store count of 6,625.

AutoZone is the leading retailer and a leading distributor of automotive replacement parts and accessories in the Americas. Each AutoZone store carries an extensive product line for cars, sport utility vehicles, vans and light trucks, including new and remanufactured automotive hard parts, maintenance items, accessories, and non-automotive products. Many stores also have a commercial sales program that provides commercial credit and prompt delivery of parts and other products to local, regional and national repair garages, dealers, service stations and public sector accounts. We also have commercial programs in all stores in Mexico and Brazil. AutoZone also sells the ALLDATA brand diagnostic and repair software through www.alldata.com and www.alldatadiy.com. Additionally, we sell automotive hard parts, maintenance items, accessories and non-automotive products through www.autozone.com and our commercial customers can make purchases through www.autozonepro.com. We also provide product information on our Duralast branded products through www.duralastparts.com. AutoZone does not derive revenue from automotive repair or installation.

AutoZone will host a conference call this morning, Tuesday, March 2, 2021, beginning at 10:00 a.m. (EST) to discuss its second quarter results. This call is being web cast and can be accessed, along with supporting slides, at AutoZone’s website at www.autozone.com and clicking on Investor Relations. Investors may also listen to the call by dialing (210) 839-8923 and entering the participant passcode 9697984. In addition, a telephone replay will be available by dialing (203) 369-1211 through April 2, 2021, 11:59 pm (EST).

This release includes certain financial information not derived in accordance with generally accepted accounting principles (“GAAP”). These non-GAAP measures include adjustments to reflect return on invested capital, adjusted debt and adjusted debit to EBITDAR. The Company believes that the presentation of these non-GAAP measures provides information that is useful to investors as it indicates more clearly the Company’s comparative year-to-year operating results, but this information should not be considered a substitute for any measures derived in accordance with GAAP. Management targets the Company’s capital structure in order to maintain its investment grade credit ratings. The Company believes this is important information for the management of its debt levels and share repurchases. We have included a reconciliation of this additional information to the most comparable GAAP measures in the accompanying reconciliation tables.

Certain statements contained in this press release constitute forward-looking statements that are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements typically use words such as “believe,” “anticipate,” “should,” “intend,” “plan,” “will,” “expect,” “estimate,” “project,” “positioned,” “strategy,” “seek,” “may,” “could,” and similar expressions. These are based on assumptions and assessments made by our management in light of experience and perception of historical trends, current conditions, expected future developments and other factors that we believe to be appropriate. These forward-looking statements are subject to a number of risks and uncertainties, including without limitation: product demand; energy prices; weather; competition; credit market conditions; cash flows; access to available and feasible financing; future stock repurchases; the impact of recessionary conditions; consumer debt levels; changes in laws or regulations; risks associated with self-insurance; war and the prospect of war, including terrorist activity; the impact of public health issues, such as the ongoing global pandemic of a novel strain of the coronavirus (“COVID-19”); inflation; the ability to hire, train and retain qualified employees; construction delays; the compromising of confidentiality, availability or integrity of information, including cyber-attacks; historic growth rate sustainability; downgrade of our credit ratings; damages to our reputation; challenges in international markets; failure or interruption of our information technology systems; origin and raw material costs of suppliers; disruption in our supply chain, due to public health epidemics or otherwise; impact of tariffs; anticipated impact of new accounting standards; and business interruptions. Certain of these risks and uncertainties are discussed in more detail in the “Risk Factors” section contained in Item 1A under Part 1 of the Company’s Annual Report on Form 10-K for the year ended August 29, 2020, and these Risk Factors should be read carefully. Forward-looking statements are not guarantees of future performance, and actual results, developments and business decisions may differ from those contemplated by such forward-looking statements, and events described above and in the “Risk Factors” could materially and adversely affect our business. However, it should be understood that it is not possible to identify or predict all such risks and other factors that could affect these forward-looking statements. Forward-looking statements speak only as of the date made. Except as required by applicable law, we undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

Contact Information:
Financial: Brian Campbell at (901) 495-7005, brian.campbell@autozone.com
Media: David McKinney at (901) 495-7951, david.mckinney@autozone.com


AutoZone's 2nd Quarter Highlights - Fiscal 2021

Condensed Consolidated Statements of Operations

2nd Quarter, FY2021

(in thousands, except per share data)

GAAP Results

12 Weeks Ended

12 Weeks Ended

February 13, 2021(2)

February 15, 2020

Net sales

$

2,910,818

$

2,513,663

Cost of sales

1,351,435

1,147,600

Gross profit

1,559,383

1,366,063

Operating, SG&A expenses

1,077,616

958,125

Operating profit (EBIT)

481,767

407,938

Interest expense, net

46,012

44,335

Income before taxes

435,755

363,603

Income taxes(1)

89,809

64,321

Net income

$

345,946

$

299,282

Net income per share:

Basic

$

15.27

$

12.70

Diluted

$

14.93

$

12.39

Weighted average shares outstanding:

Basic

22,648

23,570

Diluted

23,168

24,160

(1)The twelve weeks ended February 13, 2021 and the comparable prior year period include $11.6M and $15.0M in tax benefits from stock option exercises, respectively

(2)The twelve weeks ended February 13, 2021 was negatively impacted by charges for Emergency Time-Off benefits and other Pandemic related expenses in response to COVID-19, approximately $40M (pre-tax)

Year-To-Date 2nd Quarter, FY2021

(in thousands, except per share data)

GAAP Results

24 Weeks Ended

24 Weeks Ended

February 13, 2021(2)

February 15, 2020

Net sales

$

6,065,078

$

5,306,700

Cost of sales

2,830,078

2,439,569

Gross profit

3,235,000

2,867,131

Operating, SG&A expenses

2,138,008

1,959,170

Operating profit (EBIT)

1,096,992

907,961

Interest expense, net

92,191

88,078

Income before taxes

1,004,801

819,883

Income taxes(1)

216,422

170,263

Net income

$

788,379

$

649,620

Net income per share:

Basic

$

34.37

$

27.38

Diluted

$

33.59

$

26.70

Weighted average shares outstanding:

Basic

22,935

23,722

Diluted

23,473

24,326

(1)The twenty-four weeks ended February 13, 2021 and the comparable prior year period include $19.2M and $16.5M in tax benefits from stock option exercises, respectively

(2)The twenty-four weeks ended February 13, 2021 was negatively impacted by charges for Emergency Time-Off benefits and other Pandemic related expenses in response to COVID-19, approximately $45M (pre-tax)

Selected Balance Sheet Information

(in thousands)

February 13, 2021

February 15, 2020

August 29, 2020

Cash and cash equivalents

$

1,026,164

$

152,970

$

1,750,815

Merchandise inventories

4,736,826

4,606,211

4,473,282

Current assets

6,326,845

5,300,547

6,811,872

Property and equipment, net

4,627,993

4,476,426

4,509,221

Operating lease right-of-use assets

2,660,667

2,579,217

2,581,677

Total assets

14,159,993

12,863,749

14,423,872

Accounts payable

5,351,096

4,869,914

5,156,324

Current liabilities

6,554,271

5,779,560

6,283,091

Operating lease liabilities, less current portion

2,566,974

2,494,840

2,501,560

Total debt

5,516,396

5,451,471

5,513,371

Stockholders' deficit

(1,523,573

)

(1,711,119

)

(877,977

)

Working capital

(227,426

)

(479,013

)

528,781


AutoZone's 2nd Quarter Highlights - Fiscal 2021

Condensed Consolidated Statements of Operations

Adjusted Debt / EBITDAR

(in thousands, except adjusted debt to EBITDAR ratio)

Trailing 4 Quarters

February 13, 2021

February 15, 2020

Net income

$

1,871,731

$

1,620,797

Add: Interest expense

205,278

192,513

Income tax expense

529,701

422,949

EBIT

2,606,710

2,236,259

Add: Depreciation and amortization

401,073

384,147

Rent expense(1)

335,969

339,117

Share-based expense

46,906

43,804

EBITDAR

$

3,390,658

$

3,003,327

Debt(2)

$

4,684,979

$

5,451,471

Financing lease liabilities

225,411

196,047

Add: rent x 6(1)

2,015,814

2,034,702

Adjusted debt

$

6,926,204

$

7,682,220

Adjusted debt to EBITDAR

2.0

2.6

Adjusted Return on Invested Capital (ROIC)

(in thousands, except ROIC)

Trailing 4 Quarters

February 13, 2021

February 15, 2020

Net income

$

1,871,731

$

1,620,797

Adjustments:

Interest expense

205,278

192,513

Rent expense(1)

335,969

339,117

Tax effect(3)

(119,616

)

(110,048

)

Adjusted after-tax return

$

2,293,362

$

2,042,379

Average debt(4)(5)

$

4,648,593

$

5,241,651

Average stockholders' deficit(5)

(1,354,477

)

(1,676,987

)

Add: Rent x 6(1)

2,015,814

2,034,702

Average financing lease liabilities(5)

220,550

178,416

Invested capital

$

5,530,480

$

5,777,782

Adjusted After-Tax ROIC

41.5

%

35.3

%

(1) The table below outlines the calculation of rent expense and reconciles rent expense to total lease cost, per ASC 842, the most directly comparable GAAP financial measure, for the trailing four quarters ended February 13, 2021 and February 15, 2020 (in thousands):

Total lease cost, per ASC 842, for the trailing four quarters ended February 13, 2021

$

418,100

Less:

Financing lease interest and amortization

(55,880

)

Less:

Variable operating lease components, related to insurance and common area maintenance

(26,251

)

Rent expense for the trailing four quarters ended February 13, 2021

$

335,969

Total lease cost, per ASC 842, for the 24 weeks ended February 15, 2020

$

190,390

Less:

Financing lease interest and amortization

(28,195

)

Less:

Variable operating lease components, related to insurance and common area maintenance

(11,444

)

Rent expense for the 24 weeks ended February 15, 2020

$

150,751

Add:

Rent expense for the 29 weeks ended August 31, 2019 as previously reported prior to the adoption of ASC 842

188,366

Rent expense for the trailing four quarters ended February 15, 2020

$

339,117

(2)The Company ended Q2 FY21 with excess cash of $831.4M. Debt is presented net of excess cash

(3) Effective tax rate over trailing four quarters ended February 13, 2021 and February 15, 2020 is 22.1% and 20.7%, respectively

(4)Average debt for the trailing four quarters ended February 13, 2021 is presented net of average excess cash of $834.3M

(5)All averages are computed based on trailing 5 quarter balances

Other Selected Financial Information

(in thousands)

February 13, 2021

February 15, 2020

Cumulative share repurchases ($ since fiscal 1998)

$

23,932,433

$

22,188,053

Remaining share repurchase authorization ($)

717,567

961,947

Cumulative share repurchases (shares since fiscal 1998)

149,033

147,540

Shares outstanding, end of quarter

22,183

23,488

12 Weeks Ended

12 Weeks Ended

24 Weeks Ended

24 Weeks Ended

February 13, 2021

February 15, 2020

February 13, 2021

February 15, 2020

Depreciation and amortization

$

94,476

$

90,671

$

184,027

$

180,420

Capital spending

125,608

89,156

238,644

190,563



AutoZone's 2nd Quarter Highlights - Fiscal 2021

Selected Operating Highlights

Condensed Consolidated Statements of Operations

Store Count & Square Footage

12 Weeks Ended

12 Weeks Ended

24 Weeks Ended

24 Weeks Ended

February 13, 2021

February 15, 2020

February 13, 2021

February 15, 2020

Domestic:

Beginning stores

5,924

5,790

5,885

5,772

Stores opened

27

25

66

43

Ending domestic stores

5,951

5,815

5,951

5,815

Relocated stores

1

-

5

-

Stores with commercial programs

5,088

4,942

5,088

4,942

Square footage (in thousands)

39,003

38,077

39,003

38,077

Mexico:

Beginning stores

621

606

621

604

Stores opened

7

2

7

4

Ending Mexico stores

628

608

628

608

Brazil:

Beginning stores

45

37

43

35

Stores opened

1

1

3

3

Ending Brazil stores

46

38

46

38

Total

6,625

6,461

6,625

6,461

Square footage (in thousands)

44,021

42,885

44,021

42,885

Square footage per store

6,645

6,638

6,645

6,638

Sales Statistics

($ in thousands, except sales per average square foot)

12 Weeks Ended

12 Weeks Ended

Trailing 4 Quarters

Trailing 4 Quarters(1)

Total AutoZone Stores (Domestic, Mexico and Brazil)

February 13, 2021

February 15, 2020

February 13, 2021

February 15, 2020

Sales per average store

$

433

$

382

$

2,011

$

1,867

Sales per average square foot

$

65

$

58

$

303

$

282

Total Auto Parts (Domestic, Mexico and Brazil)

Total auto parts sales

$

2,859,698

$

2,464,988

$

13,158,997

$

11,857,188

% Increase vs. LY

16.0

%

2.6

%

11.0

%

6.8

%

Domestic Commercial

Total domestic commercial sales

$

638,913

$

556,924

$

2,883,615

$

2,679,732

% Increase vs. LY

14.7

%

8.2

%

7.6

%

15.1

%

Average sales per program per week

$

10.5

$

9.4

$

11.1

$

10.4

% Increase vs. LY

11.7

%

4.4

%

6.7

%

9.5

%

All Other, including ALLDATA

All other sales

$

51,120

$

48,675

$

231,348

$

220,953

% Increase vs. LY

5.0

%

2.0

%

4.7

%

7.7

%

(1) Fiscal 2019 results include an additional week of sales of approximately $234.5M for Total Auto Parts, $51.3M for Domestic Commercial and $4.1M for All Other. Sales per average store and sales per average square foot benefited from the additional week by $37K and $6K, respectively

12 Weeks Ended

12 Weeks Ended

24 Weeks Ended

24 Weeks Ended

February 13, 2021

February 15, 2020

February 13, 2021

February 15, 2020

Domestic same store sales

15.2

%

(0.8

%)

13.6

%

1.4

%

Inventory Statistics (Total Stores)

as of

as of

February 13, 2021

February 15, 2020

Accounts payable/inventory

113.0

%

105.7

%

($ in thousands)

Inventory

$

4,736,826

$

4,606,211

Inventory per store

715

713

Net inventory (net of payables)

(614,270

)

(263,703

)

Net inventory / per store

(93

)

(41

)

Trailing 5 Quarters

February 13, 2021

February 15, 2020

Inventory turns

1.4

x

1.3

x