AutoZone 4th Quarter Sales up 3.0%; Adjusted EPS up 14.6%
AutoZone 4th Quarter Sales up 3.0%; Adjusted EPS up 14.6%
MEMPHIS, Tenn., Sept. 19, 2006 (PRIMEZONE) -- AutoZone, Inc. (NYSE:AZO) today reported net sales of $1.939 billion for its fourth quarter (16 weeks) ended August 26, 2006, up 3.0% from fiscal fourth quarter 2005. Same store sales, or sales for stores open at least one year, were down 0.9% for the quarter.
Net income for the quarter increased 3.3% over the same period last year to $213.5 million, while diluted earnings per share increased 9.6% to $2.92 per share from $2.66 per share reported in the year-ago quarter.
Under its share repurchase program, AutoZone repurchased 3.7 million shares of its common stock for $340.0 million during the fourth quarter, at an average price of $91 per share. For the fiscal year ended August 26, 2006, AutoZone repurchased 6.2 million shares of its common stock for $578.1 million, at an average price of $93 per share.
For the quarter, gross profit, as a percentage of sales, was 49.7% (versus 48.7% last year). The Company's improvement in gross margin has largely been due to the Company's ongoing category management initiatives which include management of procurement costs, continued optimization of merchandise assortment, and an ongoing focus on direct importing initiatives. Additionally, operating expenses, as a percentage of sales, were 30.4% (versus 30.0% last year). A portion of the increase in operating expenses this year reflected $5.2 million in share-based expenses resulting from the adoption of the Financial Accounting Standards Board ("FASB") Statement No. 123(R), "Share-Based Payments." Excluding this non-comparable expense item, adjusted operating expenses were 30.1% (versus 30.0% last year) or 12 basis points over last year. Higher occupancy costs versus last year contributed to the increase in comparable operating expenses.
Excluding this quarter's share-based charges and last year's discrete tax benefit, adjusted net income increased 8.1%, while adjusted diluted earnings per share of $2.96 were up 14.6% versus the year-ago quarter.
The Company's adjusted inventory per store level, including supplier owned pay-on-scan inventory, as of August 26, 2006, was $501 thousand versus $494 thousand last year. Net inventory, defined as merchandise inventories less accounts payable, increased on a per store level to $38 thousand from $34 thousand last year.
"While we are pleased with this past quarter's bottom line results, and we are encouraged with the progress we are making on the major initiatives launched at the beginning of the year, we were not satisfied with this quarter's sales performance. Our ongoing initiatives, which focus on improving the customer shopping experience, resulted in measurable increases in customer service metrics throughout the year. While the financial burdens faced by our customers have been well-documented by many retailers, we continue to believe there are many opportunities to further improve our sales performance for the future," said Bill Rhodes, President and Chief Executive Officer.
During the quarter ended August 26, 2006, AutoZone opened 69 new stores, closed 1 store, and replaced 7 stores in the U.S. while additionally opening 8 new stores in Mexico. Additionally, the Company re-opened 4 U.S. stores closed due to hurricane-related damage. For the year, AutoZone opened 185 stores, closed 2 stores, and replaced 18 stores, while additionally opening 19 new stores in Mexico. As of August 26, 2006, the Company had 3,771 stores in 48 states plus the District of Columbia and Puerto Rico in the U.S. and 100 stores in Mexico.
AutoZone is the nation's leading retailer of automotive parts and accessories. Each store carries an extensive product line for cars, sport utility vehicles, vans and light trucks, including new and remanufactured automotive hard parts, maintenance items, accessories, and non-automotive products. Many stores also have a commercial sales program that provides commercial credit and prompt delivery of parts and other products to local, regional and national repair garages, dealers, and service stations. AutoZone also sells the ALLDATA brand diagnostic and repair software. On the web, AutoZone sells diagnostic and repair information, and auto and light truck parts through www.autozone.com. AutoZone does not derive revenue from automotive repair or installation.
AutoZone will host a conference call this morning, Tuesday, September 19, 2006, beginning at 10:00 a.m. (EDT) to discuss the fourth quarter results. Investors may listen to the conference call live and review supporting slides on the AutoZone corporate website, www.autozoneinc.com by clicking "Investor Relations," "Conference Calls." The call will also be available by dialing (210) 839-8923. A replay of the call and slides will be available on AutoZone's website. In addition, a replay of the call will be available by dialing (203) 369-0972 through Monday, September 25, 2006, at 11:59 p.m. (EDT).
This release includes certain financial information not derived in accordance with generally accepted accounting principles ("GAAP"). These non-GAAP measures include adjusted inventory, adjusted inventory per store, adjusted debt, adjusted debt/EBITDAR, adjusted rent expense, adjusted operating expense, adjusted operating profit, adjusted income before taxes, adjusted income taxes, adjusted net income, adjusted basic earnings per share, and adjusted diluted earnings per share. The Company believes that the presentation of these non-GAAP measures provides information that is useful to investors as it indicates more clearly the Company's comparative year-to-year operating results, but this information should not be considered a substitute for any measures derived in accordance with GAAP. Management manages the Company's debt levels to a ratio of adjusted debt to EBITDAR and manages cash flows available for share repurchase by monitoring cash flows before share repurchases, as shown on the attached tables. This is important information for the Company's management of its debt levels and share repurchases. We have included a reconciliation of this information to the most comparable GAAP measures in the accompanying reconciliation tables.
Certain statements contained in this press release are forward-looking statements. Forward-looking statements typically use words such as "believe," "anticipate," "should," "intend," "plan," "will," "expect," "estimate," "project," "positioned," "strategy," and similar expressions. These are based on assumptions and assessments made by our management in light of experience and perception of historical trends, current conditions, expected future developments and other factors that we believe to be appropriate. These forward-looking statements are subject to a number of risks and uncertainties, including without limitation: competition; product demand; the economy; the ability to hire and retain qualified employees; consumer debt levels; inflation; weather; raw material costs of our suppliers; energy prices; war and the prospect of war, including terrorist activity; availability of consumer transportation; construction delays; access to available and feasible financing; and changes in laws or regulations. Forward-looking statements are not guarantees of future performance and actual results; developments and business decisions may differ from those contemplated by such forward-looking statements, and such events could materially and adversely affect our business. Forward-looking statements speak only as of the date made. Except as required by applicable law, we undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise. Actual results may materially differ from anticipated results. Please refer to the Risk Factors section of AutoZone's Form 10-K for the fiscal year ended August 27, 2005, for more information related to those risks.
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