GlobeNewswire Inc | Mar 2, 2021 06:55AM EST

March 02, 2021

MEMPHIS, Tenn., March 02, 2021 (GLOBE NEWSWIRE) -- AutoZone, Inc. (NYSE: AZO) today reported net sales of $2.9 billion for its second quarter (12 weeks) ended February 13, 2021, an increase of 15.8% from the second quarter of fiscal 2020 (12 weeks). Domestic same store sales, or sales for stores open at least one year, increased 15.2% for the quarter.

For the quarter, gross profit, as a percentage of sales, was 53.6%, a decrease of 77 basis points versus the prior year. The decrease in gross margin was attributable to increased supply chain costs, pricing initiatives, accelerated loyalty program participation and a shift in mix. Operating expenses, as a percentage of sales, improved to 37.0% versus 38.1% for last years quarter, with leverage primarily due to higher sales volumes, offset by additional emergency time-off benefits and other pandemic-related expenses totaling approximately $40 million (137 basis points).

Operating profit increased 18.1% to $481.8 million. Net income for the quarter increased 15.6% over the same period last year to $345.9 million, while diluted earnings per share increased 20.5% to $14.93 per share from $12.39 per share in the year-ago quarter. The increase in net income was driven by strong topline growth.

AutoZone repurchased 752,004 shares of its common stock for $900 million during the second quarter, at an average price of $1,197 per share. At the end of the second quarter, the Company had $717.6 million remaining under its current share repurchase authorization.

The Companys inventory increased 2.8% over the same period last year, driven by new stores and improved product assortment. Net inventory, defined as merchandise inventories less accounts payable, on a per store basis, was approximately negative $93 thousand versus negative $41 thousand last year and negative $99 thousand last quarter.

This quarter, we were again able to deliver exceptionally strong same store sales and earnings growth, and many performance metrics remained at historically high levels. While our strong (DIY) sales have been aided by government stimulus and changes to consumer behavior as a result of the pandemic, our growth initiatives continue to deliver strong share gains with both DIY and Commercial customers. In Commercial, our business was up 15% this quarter as the investments we are making in pricing, service and assortment are strengthening our competitive position in this large, fragmented market. We intend to accelerate our Companys historical growth rate as we increase our penetration in this market.

Our outstanding performance is also driven by the exceptional and heroic efforts of our AutoZoners, particularly those in our stores and distribution centers who have been there every day for our customers during these extraordinary times. We recently announced a financial incentive for our employees to receive the COVID-19 vaccine and we will continue to invest appropriately in a safe and productive work environment for our people, said Bill Rhodes, Chairman, President and Chief Executive Officer.

During the quarter ended February 13, 2021, AutoZone opened 27 new stores in the U.S., seven in Mexico and one in Brazil. As of February 13, 2021, the Company had 5,951 stores in the U.S., 628 stores in Mexico, and 46 stores in Brazil for a total store count of 6,625.

AutoZone is the leading retailer and a leading distributor of automotive replacement parts and accessories in the Americas. Each AutoZone 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, service stations and public sector accounts. We also have commercial programs in all stores in Mexico and Brazil. AutoZone also sells the ALLDATA brand diagnostic and repair software through www.alldata.com and www.alldatadiy.com. Additionally, we sell automotive hard parts, maintenance items, accessories and non-automotive products through www.autozone.com and our commercial customers can make purchases through www.autozonepro.com. We also provide product information on our Duralast branded products through www.duralastparts.com. AutoZone does not derive revenue from automotive repair or installation.

AutoZone will host a conference call this morning, Tuesday, March 2, 2021, beginning at 10:00 a.m. (EST) to discuss its second quarter results. This call is being web cast and can be accessed, along with supporting slides, at AutoZones website at www.autozone.com and clicking on Investor Relations. Investors may also listen to the call by dialing (210) 839-8923 and entering the participant passcode 9697984. In addition, a telephone replay will be available by dialing (203) 369-1211 through April 2, 2021, 11:59 pm (EST).

This release includes certain financial information not derived in accordance with generally accepted accounting principles (GAAP). These non-GAAP measures include adjustments to reflect return on invested capital, adjusted debt and adjusted debit to EBITDAR. The Company believes that the presentation of these non-GAAP measures provides information that is useful to investors as it indicates more clearly the Companys comparative year-to-year operating results, but this information should not be considered a substitute for any measures derived in accordance with GAAP. Management targets the Companys capital structure in order to maintain its investment grade credit ratings. The Company believes this is important information for the management of its debt levels and share repurchases. We have included a reconciliation of this additional information to the most comparable GAAP measures in the accompanying reconciliation tables.

Certain statements contained in this press release constitute forward-looking statements that are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements typically use words such as believe, anticipate, should, intend, plan, will, expect, estimate, project, positioned, strategy, seek, may, could, 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: product demand; energy prices; weather; competition; credit market conditions; cash flows; access to available and feasible financing; future stock repurchases; the impact of recessionary conditions; consumer debt levels; changes in laws or regulations; risks associated with self-insurance; war and the prospect of war, including terrorist activity; the impact of public health issues, such as the ongoing global pandemic of a novel strain of the coronavirus (COVID-19); inflation; the ability to hire, train and retain qualified employees; construction delays; the compromising of confidentiality, availability or integrity of information, including cyber-attacks; historic growth rate sustainability; downgrade of our credit ratings; damages to our reputation; challenges in international markets; failure or interruption of our information technology systems; origin and raw material costs of suppliers; disruption in our supply chain, due to public health epidemics or otherwise; impact of tariffs; anticipated impact of new accounting standards; and business interruptions. Certain of these risks and uncertainties are discussed in more detail in the Risk Factors section contained in Item 1A under Part 1 of the Companys Annual Report on Form 10-K for the year ended August 29, 2020, and these Risk Factors should be read carefully. 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 events described above and in the Risk Factors could materially and adversely affect our business. However, it should be understood that it is not possible to identify or predict all such risks and other factors that could affect these forward-looking statements. 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.

Contact Information:Financial: Brian Campbell at (901) 495-7005, brian.campbell@autozone.comMedia: David McKinney at (901) 495-7951, david.mckinney@autozone.com

AutoZone's 2nd Quarter Highlights - Fiscal 2021 Condensed Consolidated Statements of Operations 2nd Quarter, FY2021 (in thousands, except per share data) GAAP Results 12 Weeks Ended 12 Weeks Ended February 13, 2021^ February 15, (2) 2020 Net sales $ 2,910,818 $ 2,513,663 Cost of sales 1,351,435 1,147,600 Gross profit 1,559,383 1,366,063 Operating, SG& 1,077,616 958,125 A expensesOperating 481,767 407,938 profit (EBIT)Interest 46,012 44,335 expense, netIncome before 435,755 363,603 taxesIncome taxes^ 89,809 64,321 (1)Net income $ 345,946 $ 299,282 Net income per share: Basic $ 15.27 $ 12.70 Diluted $ 14.93 $ 12.39 Weightedaverage shares outstanding: Basic 22,648 23,570 Diluted 23,168 24,160 ^(1)The twelve weeks ended February 13, 2021 and the comparable prior year period include $11.6M and $15.0M intax benefits from stock option exercises, respectively

^(2)The twelve weeks ended February 13, 2021 was negatively impacted by charges for Emergency Time-Offbenefits and other Pandemic related expenses in response to COVID-19, approximately $40M (pre-tax) Year-To-Date 2nd Quarter, FY2021 (in thousands, except per share data) GAAP Results 24 Weeks Ended 24 Weeks Ended February 13, 2021^ February 15, (2) 2020 Net sales $ 6,065,078 $ 5,306,700 Cost of sales 2,830,078 2,439,569 Gross profit 3,235,000 2,867,131 Operating, SG& 2,138,008 1,959,170 A expensesOperating 1,096,992 907,961 profit (EBIT)Interest 92,191 88,078 expense, netIncome before 1,004,801 819,883 taxesIncome taxes^ 216,422 170,263 (1)Net income $ 788,379 $ 649,620 Net income per share: Basic $ 34.37 $ 27.38 Diluted $ 33.59 $ 26.70 Weightedaverage shares outstanding: Basic 22,935 23,722 Diluted 23,473 24,326 ^(1)The twenty-four weeks ended February 13, 2021 and the comparable prior year period include $19.2M and $16.5M intax benefits from stock option exercises, respectively

^(2)The twenty-four weeks ended February 13, 2021 was negatively impacted by charges for Emergency Time-Offbenefits and other Pandemic related expenses in response to COVID-19, approximately $45M (pre-tax) Selected Balance Sheet Information (in thousands) February 13, 2021 February 15, August 29, 2020 2020Cash and cash $ 1,026,164 $ 152,970 $ 1,750,815 equivalentsMerchandise 4,736,826 4,606,211 4,473,282 inventoriesCurrent assets 6,326,845 5,300,547 6,811,872 Property and 4,627,993 4,476,426 4,509,221 equipment, netOperatinglease 2,660,667 2,579,217 2,581,677 right-of-useassetsTotal assets 14,159,993 12,863,749 14,423,872 Accounts 5,351,096 4,869,914 5,156,324 payableCurrent 6,554,271 5,779,560 6,283,091 liabilitiesOperatingleaseliabilities, 2,566,974 2,494,840 2,501,560 less currentportionTotal debt 5,516,396 5,451,471 5,513,371 Stockholders' (1,523,573 ) (1,711,119 ) (877,977 ) deficitWorking (227,426 ) (479,013 ) 528,781 capital

AutoZone's 2nd Quarter Highlights - Fiscal 2021 Condensed Consolidated Statements of Operations Adjusted Debt / EBITDAR (in thousands, exceptadjusted debt to EBITDAR Trailing 4 Quarters ratio) February 13, February 15, 2021 2020Net income $ 1,871,731 $ 1,620,797 Add: Interest expense 205,278 192,513 Income tax expense 529,701 422,949 EBIT 2,606,710 2,236,259 Add: Depreciation and 401,073 384,147 amortizationRent expense^(1) 335,969 339,117 Share-based expense 46,906 43,804 EBITDAR $ 3,390,658 $ 3,003,327 Debt^(2) $ 4,684,979 $ 5,451,471 Financing lease 225,411 196,047 liabilitiesAdd: rent x 6^(1) 2,015,814 2,034,702 Adjusted debt $ 6,926,204 $ 7,682,220 Adjusted debt to EBITDAR 2.0 2.6 Adjusted Return on Invested Capital (ROIC) (in thousands, except ROIC) Trailing 4 Quarters February 13, February 15, 2021 2020Net income $ 1,871,731 $ 1,620,797 Adjustments: Interest expense 205,278 192,513 Rent expense^(1) 335,969 339,117 Tax effect^(3) (119,616 ) (110,048 ) Adjusted after-tax $ 2,293,362 $ 2,042,379 return Average debt^(4)(5) $ 4,648,593 $ 5,241,651 Average stockholders' (1,354,477 ) (1,676,987 ) deficit^(5)Add: Rent x 6^(1) 2,015,814 2,034,702 Average financing lease 220,550 178,416 liabilities^(5)Invested capital $ 5,530,480 $ 5,777,782 Adjusted After-Tax ROIC 41.5 % 35.3 % ^(1) The table below outlines the calculation of rent expense andreconciles rent expense to total lease cost, per ASC 842, the most directly comparable GAAP financial measure, for the trailing fourquarters ended February 13, 2021 and February 15, 2020 (in thousands):

Total lease cost, per ASC 842, for the trailing four quarters ended February $ 418,100 13, 2021 Less: Financing lease interest and (55,880 ) amortization Variable operating lease Less: components, related to insurance (26,251 ) and common area maintenance

Rent expense for the trailing four $ 335,969 quarters ended February 13, 2021 Total lease cost, per ASC 842, for the $ 190,390 24 weeks ended February 15, 2020 Financing Less: lease (28,195 ) interest and amortization Variable operating lease Less: components, related to insurance (11,444 ) and common area maintenance

Rent expense for the 24 weeks ended $ 150,751 February 15, 2020 Rent expense for the 29 weeks Add: ended August 31, 2019 as 188,366 previously reported prior to the adoption of ASC 842 Rent expense for the trailing four $ 339,117 quarters ended February 15, 2020 ^(2)The Company ended Q2 FY21 with excess cash of $831.4M. Debt is presented net of excess cash^(3) Effective tax rate over trailing four quarters ended February 13, 2021 and February 15, 2020 is 22.1% and 20.7%, respectively^(4)Average debt for the trailing four quarters ended February 13, 2021 is presented net of average excess cash of $834.3M^(5)All averages are computed based on trailing 5 quarter balances Other Selected Financial Information (in thousands) February 13, February 15, 2021 2020Cumulative sharerepurchases ($ since $ 23,932,433 $ 22,188,053 fiscal 1998)Remaining sharerepurchase authorization 717,567 961,947 ($) Cumulative sharerepurchases (shares 149,033 147,540 since fiscal 1998) Shares outstanding, end 22,183 23,488 of quarter 12 Weeks Ended 12 Weeks Ended 24 Weeks 24 Weeks Ended Ended February 13, February 15, February February 2021 2020 13, 2021 15, 2020 Depreciation and $ 94,476 $ 90,671 $ 184,027 $ 180,420 amortization Capital spending 125,608 89,156 238,644 190,563

AutoZone's 2nd Quarter Highlights - Fiscal 2021 Selected Operating Highlights Condensed Consolidated Statements of Operations Store Count & Square Footage 12 Weeks Ended 12 Weeks Ended 24 Weeks Ended 24 Weeks Ended February 13, February 15, February 13, February 15, 2021 2020 2021 2020Domestic: Beginning 5,924 5,790 5,885 5,772 stores Stores opened 27 25 66 43 Ending domestic 5,951 5,815 5,951 5,815 stores Relocated 1 - 5 - stores Stores with commercial 5,088 4,942 5,088 4,942 programs Square footage 39,003 38,077 39,003 38,077 (in thousands) Mexico: Beginning 621 606 621 604 stores Stores opened 7 2 7 4 Ending Mexico 628 608 628 608 stores Brazil: Beginning 45 37 43 35 stores Stores opened 1 1 3 3 Ending Brazil 46 38 46 38 stores Total 6,625 6,461 6,625 6,461 Square footage 44,021 42,885 44,021 42,885 (in thousands) Square footage 6,645 6,638 6,645 6,638 per store Sales Statistics ($ in thousands,except sales per average squarefoot) 12 Weeks Ended 12 Weeks Ended Trailing 4 Trailing 4 Quarters Quarters^(1)Total AutoZone Stores February 13, February 15, February 13, February 15,(Domestic, Mexico and 2021 2020 2021 2020 Brazil) Sales per $ 433 $ 382 $ 2,011 $ 1,867 average store Sales per average square $ 65 $ 58 $ 303 $ 282 foot Total Auto Parts(Domestic, Mexico and Brazil) Total auto $ 2,859,698 $ 2,464,988 $ 13,158,997 $ 11,857,188 parts sales % Increase vs. 16.0 % 2.6 % 11.0 % 6.8 % LY Domestic Commercial Total domestic commercial $ 638,913 $ 556,924 $ 2,883,615 $ 2,679,732 sales % Increase vs. 14.7 % 8.2 % 7.6 % 15.1 % LY Average sales per program $ 10.5 $ 9.4 $ 11.1 $ 10.4 per week % Increase vs. 11.7 % 4.4 % 6.7 % 9.5 % LY All Other, including ALLDATA All other $ 51,120 $ 48,675 $ 231,348 $ 220,953 sales % Increase vs. 5.0 % 2.0 % 4.7 % 7.7 % LY ^(1)Fiscal 2019 results include an additional week of sales of approximately$234.5M for Total Auto Parts, $51.3M for Domestic Commercial and $4.1M for All Other. Sales per average storeand sales per average square foot benefitedfrom the additional week by $37K and $6K, respectively 12 Weeks Ended 12 Weeks Ended 24 Weeks Ended 24 Weeks Ended February 13, February 15, February 13, February 15, 2021 2020 2021 2020Domestic same 15.2 % (0.8 %) 13.6 % 1.4 % store sales InventoryStatistics (Total Stores) as of as of February 13, February 15, 2021 2020 Accounts payable/ 113.0 % 105.7 % inventory ($ in thousands) Inventory $ 4,736,826 $ 4,606,211 Inventory per 715 713 store Net inventory (net of (614,270 ) (263,703 ) payables) Net inventory (93 ) (41 ) / per store Trailing 5 Quarters February 13, February 15, 2021 2020 Inventory 1.4 x 1.3 x turns