AutoZone Inc (AZO) Reports Modest Sales Growth and Strong Earnings Per Share in Q1
AutoZone Inc (NYSE:AZO) announced a 5.1% increase in net sales reaching $4.2 billion for the first quarter.
Gross profit margin improved significantly, contributing to an 18.6% increase in diluted earnings per share.
The company continues its aggressive share repurchase program, investing $1.5 billion in the first quarter.
AutoZone Inc (NYSE:AZO) opened 25 net new stores during the quarter, expanding its total store count to 7,165.
On December 5, 2023, AutoZone Inc (NYSE:AZO) released its 8-K filing, detailing the financial results for the first quarter ended November 18, 2023. The company reported a 5.1% increase in net sales to $4.2 billion compared to the first quarter of fiscal 2023. Domestic same store sales saw a modest increase of 1.2%, while international sales surged by 25.1% in constant currency terms.
Financial Highlights and Performance
AutoZone Inc (NYSE:AZO) experienced a notable improvement in gross profit, which as a percentage of sales, reached 52.8%, marking an increase of 279 basis points over the prior year. This improvement was primarily driven by non-cash LIFO favorability and favorable supply chain costs. Operating profit rose by 17.4% to $848.6 million. The company's net income also saw a healthy increase of 10.0% to $593.5 million, with diluted earnings per share growing by 18.6% to $32.55.
Despite these positive figures, operating expenses as a percentage of sales increased slightly to 32.6%, compared to 31.9% last year, mainly due to higher domestic store payroll and investments in technology. The company's aggressive share repurchase program continued, with 580 thousand shares bought back at an average price of $2,590 per share, totaling an investment of $1.5 billion for the quarter.
Balance Sheet and Cash Flow
The balance sheet of AutoZone Inc (NYSE:AZO) showed an inventory increase of 3.0% over the previous year, attributed to new store growth. The net inventory per store was negative $197 thousand, an improvement from negative $249 thousand the previous year. Cash and cash equivalents stood at $282.9 million, and the company had a stockholders' deficit of $5.2 billion, reflecting its significant share repurchase investments over time.
From an operational perspective, AutoZone Inc (NYSE:AZO) generated $830.3 million in cash flow from operations and spent $235.4 million on capital expenditures. The company's inventory turnover remained stable at 1.5 times.
Store Expansion and Sales Metrics
During the quarter, AutoZone Inc (NYSE:AZO) opened 17 new stores in the U.S., five in Mexico, and four in Brazil, while closing one U.S. store, resulting in a net increase of 25 stores. The total store count now stands at 7,165. The company reported sales per average store of $575 thousand and sales per average square foot of $86.
Executive Commentary
"I want to thank all AutoZoners across the company for their efforts during our first fiscal quarter. The commitment to superior service resulted in our ability to deliver strong financial results. Our domestic sales results were solid despite tough comparisons from a year ago, while our international business continues to deliver exceptionally strong sales growth. We remain committed to driving sales and earnings growth throughout fiscal 2024, while returning cash to our shareholders," said Bill Rhodes, Chairman, President and Chief Executive Officer.
In conclusion, AutoZone Inc (NYSE:AZO) has demonstrated a solid start to fiscal 2024 with increased sales, improved profitability, and continued store expansion. The company's focus on returning value to shareholders through its share repurchase program, coupled with strategic investments in its operations, positions it well for sustained growth in the competitive automotive parts industry.
Explore the complete 8-K earnings release (here) from AutoZone Inc for further details.
This article first appeared on GuruFocus.
