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AutoZone posts earnings beat, grows sales annually

Yahoo Finance Live anchors discuss the decline in stock for AutoZone following first-quarter earnings.

Video Transcript

BRAD SMITH: Also getting in the zone here, as we check in on shares of AutoZone, ticker symbol AZO, this morning. They're moving lower by about 1% right now, following an earnings beat on the top and bottom lines for the first quarter. The company grew net sales by over 8%. And same store sales, they saw that increase 5% year over year. And so, taking a look at some of those figures for AutoZone, there, you're taking a look at the revenue. That was-- it came in at about $3.98 billion for the quarter here.

BRIAN SOZZI: Yeah, and this just continues some good results out of these auto supply retailers. O'Reilly had a somewhat decent third quarter. AutoZone, pretty good. I like AutoZone. I think they have a better inventory position than Pep Boys. I just bought some leather conditioner for my car there. Very great experience.

BRAD SMITH: I think some of the investors might be zeroing in on, aside from the leather conditioner, the operating profit decrease by about 4.2%. Probably really good leather conditioner.

BRIAN SOZZI: Well, I-- look, I work hard every day. You know, I want my ass sitting on very smooth, supple leather. And that's why I bought this stuff.

BRAD SMITH: Well, you bring up a good point in that-- [LAUGHING]

BRIAN SOZZI: You roped me in. You kept it going. You want to hear why I bought leather conditioner, Brad.

BRAD SMITH: But there are a lot of people that are out there like you who want the good leather conditioner because of the number of used cars that were sold in 2021--

BRIAN SOZZI: With hard leather.

BRAD SMITH: --with hard leather, yes, who need to take care of their car now.

JULIE HYMAN: Well, apparently, a lot of their sales are coming from professional mechanics, who probably--

BRIAN SOZZI: Don't care about hard or soft leather. They're making my leather dirty when they fix my car.

JULIE HYMAN: The leather in which their clients are going to be sitting, but in any case, it looks like 26% of revenue is now coming from professional mechanics. That's a sector that AutoZone has been courting. It costed a little bit on margins, right, but margins still came in better than estimated for the quarter. So that's something that's helping. But the stock is down just about 1%.

BRIAN SOZZI: Yeah, I've seen a lot of mechanics, at least the AutoZones by me, getting parts at them. I think they're just gaining market share from Pep Boys. And Pep Boys inventory positions, they're awful. When you go into these stores now, they're empty. There's no one working behind the desks. So this might be a classic market share grab by AutoZone.

BRAD SMITH: It's kind of a question of how long of a tail some of the sales that took place, especially among used vehicles during 2021-- I mean, 40.9 million vehicles were sold, used vehicles, according to Cox Automotive. And it's a question of how long of a tail that can provide to a Pep Boys, can provide to an AutoZone, even as here in 2022, because there is more cost for financing that used car purchase.

And quite frankly, some of those used cars might cost as much as a new car. That might be a near-term headwind, but I think long-term, for the number of used cars that were sold back in 2021, and even in 2020, perhaps, perhaps that is where the tailwind persists for a company in AutoZone and some of the others.

BRIAN SOZZI: Well, if you need help changing out your engine in your car, just give me a call. I got you.

BRAD SMITH: I got to get one first.

BRIAN SOZZI: Oh, OK, fair enough.

BRAD SMITH: Yeah. Right now, it's the MTA guy.