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How much a stock's price changes over time is a significant driver for most investors. Not only can price performance impact your portfolio, but it can help you compare investment results across sectors and industries as well.
Another thing that can drive investing is the fear of missing out, or FOMO. This particularly applies to tech giants and popular consumer-facing stocks.
What if you'd invested in AutoZone (AZO) ten years ago? It may not have been easy to hold on to AZO for all that time, but if you did, how much would your investment be worth today?
AutoZone's Business In-Depth
With that in mind, let's take a look at AutoZone's main business drivers.
AutoZone, Inc. is one of the leading specialty retailers and distributor of automotive replacement parts and accessories in the United States. It operates in the Do-It-Yourself (DIY) retail, Do-It-for-Me (DIFM) auto parts and products markets. At the end of fiscal 2020, the company had 5,885 stores in the United States, 621 in Mexico and 43 in Brazil. Total store count was 6,549 as of Aug 29, 2020. Each store offers wide-ranging products for cars, sport utility vehicles, vans and light trucks, including new and remanufactured automotive hard parts, maintenance items, accessories, and non-automotive products.
Apart from providing automotive products, it also has many commercial sales programs, which provides commercial credit, and delivers parts and other products to local repair garages, dealers and service stations. AutoZone sells the ALLDATA brand’s automotive diagnostic and repair software through www.alldata.com and www.alldatadiy.com. This offers comprehensive factory-correct repair information to DIY customers along with ALLDATA repair subscription.
The company has online presence to sell automotive hard parts, maintenance items, accessories and non-automotive products through its website www.autozone.com. For commercial customers, it has www.autozonepro.com to make purchases. AutoZone selects and purchases merchandise from store support centers situated at Memphis, TN; Monterrey, MX; and Sao Paulo, BR. Also, it has office in Shanghai, China, to support sourcing efforts in Asia. This centralization improves the execution of merchandising and marketing strategies at the store level, as well as reduces expenses and cost of sales.
As of Aug 29, 2020, the company had roughly 100,000 employees, of which 60% consisted of full-time employees. Out of the total count, 91% are employed at the AutoZone stores or in direct field supervision. Further, 6% of those work at distribution centers while 3% work at store support and other functions.
The company reported a 6.5% year over year increase in net revenues to $12.6 billion in fiscal 2020. This growth was led by domestic same store sales increase of 7.4% as well as net sales of $244.7 million generated from new stores. AutoZone generated net income of $1.7 billion, up from $1.6 billion recorded in fiscal 2019.
Putting together a successful investment portfolio takes a combination of research, patience, and a little bit of risk. For AutoZone, if you bought shares a decade ago, you're likely feeling really good about your investment today.
A $1000 investment made in March 2011 would be worth $4,974.05, or a gain of 397.41%, as of March 25, 2021, according to our calculations. This return excludes dividends but includes price appreciation.
Compare this to the S&P 500's rally of 196.96% and gold's return of 16.59% over the same time frame.
Looking ahead, analysts are expecting more upside for AZO.
AutoZone's high quality products, store-expansion initiatives and omni-channel efforts to improve customer shopping experience are boosting the company’s market share. The retailer of automotive aftermarket parts has been generating record revenues since 29 consecutive years on the back of stable growth in the auto parts market and expansion of the store base. Increasing e-commerce efforts and cost-saving efforts amid the coronavirus pandemic, are aiding the company’s top line growth. However, new strains of the COVID-19 pandemic may mar the firm’s near-term revenues and earnings. High debt levels restrict the firm’s financial flexibility. Further, increasing operating expenses and tariff woes are expected to clip the company’s profits. As such, the stock warrants a cautious stance as of now.
The stock is up 13.75% over the past four weeks, and no earnings estimate has gone lower in the past two months, compared to 8 higher, for fiscal 2021. The consensus estimate has moved up as well.