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AutoZone Inc. 1Q19 earnings impress

AutoZone, the specialty retailer of automotive parts and accessories, reported 1Q19 results on Tuesday (4 December). The results showed that its revenue rose c. 2.0% YoY to $2.64bn compared with $2.59bn recorded in 1Q18, while diluted EPS stood at $13.47 (+34.7% YoY) vs $10.00 posted in the same period of last year. Revenue was in-line with consensus forecasts but the company posted a beat on the earnings front – consensus forecasts had expected earnings of $12.21/ share. This as stronger same-store sales and tax-related benefits helped the retailer push up earnings (AutoZone paid $97.4mn in income taxes in the quarter, compared to $148.9mn in the year-earlier period). Net income came in at $351.41mn (vs 1Q18’s $281.0mn), while operating profit of $487.82mn was also better than the firm’s operating profit of $468.75mn from the same period of the year prior.

Domestic same-store sales in 1Q19 rose 2.7% YoY also topping consensus expectations of 1.7% (in 1Q18 domestic same-store sales were up 2.3%). The gross margin improved by 90 bpts to 53.7% of sales, while operating expenses as a percentage of sales rose 60 bpts to 35.2%.

During the quarter under review, AutoZone opened 13 new stores and relocated one store in the US and opened three new stores in Mexico. As at mid-November, the firm had 5,631 stores in the US, 567 stores in Mexico, and 20 stores in Brazil for a total store count of 6,218.

CEO Bill Rhodes noted that industry fundamentals “remain strong” adding that as the firm continues “ … to invest in our business, we remain committed to our disciplined approach of increasing operating earnings and cash flow, and utilising our balance sheet and capital effectively.”

The share price rallied c. 4% after the results. AutoZone shares have climbed c. 16% YTD.



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