Before the opening bell on May 25, AutoZone Inc. (AZO, Financial) released results for its fiscal third quarter of 2021, which ended May 8. The company's earnings and revenue exceeded expectations thanks to rising demand for auto parts.
Key metrics
The American retailer of aftermarket automotive parts and accessories posted diluted earnings of $26.48 per share, up 73.8% year over year. Analysts had predicted earnings of $20.13. Revenue of $3.65 billion was up 31.36% and surpassed analysts' projections of $3.27 billion.
CEO Bill Rhodes had the following to say:
"We are very proud to report another quarter of exceptionally strong same store sales and earnings growth. The AutoZone team has done a wonderful job of managing, and leading, throughout this pandemic. While our DIY business was again very strong this quarter, our Commercial business' 44% sales growth stood out as exceptional. The investments we are making in Commercial pricing, service and assortment are strengthening our competitive position in this large, fragmented market. We intend to accelerate our Company's historical Commercial growth rate as we increase our penetration in this market."
Gross profit, as a percentage of sales, dropped 118 basis points to 52.4% as compared to last year owing to lower merchandise margins, which was highly driven by a shift in mix. Operating expenses decreased to 30.4% of sales from 35.9% of sales in the year-ago quarter as a result of leverage from higher sales volume.
Comparable store sales in the U.S. for the quarter were up 28.9% thanks to strong performance in the retail and commercial segments.
Store count
During the quarter, AutoZone launched 25 new stores and shut down one store in the U.S. The company opened seven stores in Mexico and one in Brazil. As of May 8, the company had a total of 6,657 stores, with 5,975 in the U.S., 635 in Mexico and 47 in Brazil.
Financials
AutoZone had cash and cash equivalents of $976 million and total debt of $5.27 billion at quarter's end.
During the quarter, the company bought back 663,328 shares, which were worth $900 million. The average price per share was $1,357. The company is authorized to buy back $1.3 billion worth of shares under the stock buyback program.
Looking forward
Looking ahead, the company expects its overall results to improve given the growing demand for used vehicles in preference to new vehicles. The company also announced that it would add 20,000 new jobs to cope with retail as well as commercial demand for auto parts.
Disclosure: I do not hold any positions in the stocks mentioned.
Not a Premium Member of GuruFocus? Sign up for a free 7-day trial here.
