GlobeNewswire Inc | May 25, 2021 06:55AM EDT

May 25, 2021

MEMPHIS, Tenn., May 25, 2021 (GLOBE NEWSWIRE) -- AutoZone, Inc. (NYSE: AZO) today reported net sales of $3.7 billion for its third quarter (12 weeks) ended May 8, 2021, an increase of 31.4% from the third quarter of fiscal 2020 (12 weeks). Domestic same store sales, or sales for stores open at least one year, increased 28.9% for the quarter.

For the quarter, gross profit, as a percentage of sales, was 52.4%, a decrease of 118 basis points versus the prior year. The decrease in gross margin was primarily driven by the accelerated growth in our Commercial business and our investment in pricing initiatives. Operating expenses, as a percentage of sales, was 30.4% versus 35.9% for last years quarter. The decrease in operating expenses, as a percentage of sales, was driven by strong sales growth and approximately $75 million in prior year pandemic related expenses, including Emergency Time-Off (ETO) for our AutoZoners.

Operating profit increased 63.4% to $803.5 million. Net income for the quarter increased 73.9% over the same period last year to $596.2 million, while diluted earnings per share increased 84.0% to $26.48 per share from $14.39 per share in the year-ago quarter. The increase in net income was driven by strong topline growth and operating expense leverage.

AutoZone repurchased 663,328 shares of its common stock for $900.0 million during the third quarter, at an average price of $1,357 per share. At the end of the third quarter, the Company had $1.3 billion remaining under its current share repurchase authorization.

The Companys inventory increased 5.1% 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 negative $167 thousand versus negative $56 thousand last year and negative $93 thousand last quarter.

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 Companys historical Commercial growth rate as we increase our penetration in this market. While we understand sales trends will slow, we must work diligently during this fourth quarter to maintain the share gains we have achieved. As always, we cannot take anything for granted, but we remain excited about the ongoing sales opportunities in front of us. Additionally, we remain committed to investing appropriately in a safe and productive environment for our customers and AutoZoners. As we opportunistically invest capital in our business, we remain committed to our disciplined approach of increasing operating earnings and cash flow, and of utilizing our balance sheet and capital effectively, said Bill Rhodes, Chairman, President and Chief Executive Officer.

During the quarter ended May 8, 2021, AutoZone opened 25 new stores and closed one store in the U.S. and opened seven stores in Mexico and one store in Brazil. As of May 8, 2021, the Company had 5,975 stores in the U.S., 635 in Mexico and 47 in Brazil for a total store count of 6,657.

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, May 25, 2021, beginning at 10:00 a.m. (EDT) to discuss its third 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 (877) 407-8031. In addition, a telephone replay will be available by dialing (203) 369-1211 through June 25, 2021, 11:59 pm (EDT).

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 debt 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 coronavirus pandemic; 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; 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 3rd Quarter Highlights - Fiscal 2021 Condensed Consolidated Statements of Operations3rd Quarter, FY2021(in thousands,except per share data) GAAP Results 12 Weeks Ended 12 Weeks Ended May 8, 2021 May 9, 2020^(2) Net sales $ 3,651,023 $ 2,779,299 Cost of sales 1,736,077 1,288,651 Gross profit 1,914,946 1,490,648 Operating, SG& 1,111,441 998,975 A expensesOperating 803,505 491,673 profit (EBIT)Interest 45,026 47,450 expense, netIncome before 758,479 444,223 taxesIncome taxes^ 162,315 101,327 (1)Net income $ 596,164 $ 342,896 Net income per share: Basic $ 27.15 $ 14.66 Diluted $ 26.48 $ 14.39 Weightedaverage shares outstanding: Basic 21,956 23,386 Diluted 22,515 23,828 ^(1)The twelve weeks ended May 8, 2021 and the comparable prior year periodinclude $16.0M and $1.1M in tax benefits from stock option exercises, respectively ^(2)The twelve weeks ended May 9, 2020 were negatively impacted byapproximately $75M (pre-tax) of pandemic related expenses, including Emergency Time-Off Year-To-Date3rd Quarter, FY2021(in thousands,except per share data) GAAP Results 36 Weeks Ended 36 Weeks Ended May 8, 2021^(2) May 9, 2020^(2) Net sales $ 9,716,101 $ 8,085,999 Cost of sales 4,566,155 3,728,221 Gross profit 5,149,946 4,357,778 Operating, SG& 3,249,449 2,958,144 A expensesOperating 1,900,497 1,399,634 profit (EBIT)Interest 137,217 135,528 expense, netIncome before 1,763,280 1,264,106 taxesIncome taxes^ 378,737 271,591 (1)Net income $ 1,384,543 $ 992,515 Net income per share: Basic $ 61.24 $ 42.04 Diluted $ 59.80 $ 41.08 Weightedaverage shares outstanding: Basic 22,609 23,610 Diluted 23,154 24,160 ^(1)The thirty-six weeks ended May 8, 2021 and the comparable prior yearperiod include $35.2M and $17.6M in tax benefits from stock option exercises, respectively ^(2)The thirty-six weeks ended May 8, 2021 and the comparable prior yearperiod were negatively impacted by pandemic related expenses, including Emergency Time-Off of approximately $46M (pre-tax) and $75M (pre-tax),respectively SelectedBalance Sheet Information(in thousands) May 8, 2021 May 9, 2020 August 29, 2020 Cash and cash $ 975,646 $ 509,118 $ 1,750,815 equivalentsMerchandise 4,665,477 4,440,602 4,473,282 inventoriesCurrent assets 6,224,396 5,397,993 6,811,872 Property and 4,683,149 4,384,586 4,509,221 equipment, netOperatinglease 2,694,846 2,613,849 2,581,677 right-of-useassetsTotal assets 14,137,946 12,902,131 14,423,872 Accounts 5,778,222 4,806,329 5,156,324 payableCurrent 7,013,249 5,769,076 6,283,091 liabilitiesOperatingleaseliabilities, 2,594,506 2,481,280 2,501,560 less currentportionTotal debt 5,267,896 5,418,272 5,513,371 Stockholders' (1,763,392 ) (1,632,736 ) (877,977 ) deficitWorking (788,853 ) (371,083 ) 528,781 capital

AutoZone's3rdQuarter Highlights- Fiscal2021 Condensed Consolidated Statements of Operations Adjusted Debt / EBITDAR (in thousands, except adjusted Trailing 4 Quarters debt to EBITDAR ratio) May 8, 2021 May 9, 2020 Net income $ 2,125,000 $ 1,557,744 Add: Interest expense 202,854 196,724 Income tax expense 590,688 425,941 EBIT 2,918,542 2,180,409 Add: Depreciation and 403,395 390,954 amortizationRent expense^(1) 339,193 335,794 Share-based expense 50,645 43,977 EBITDAR $ 3,711,775 $ 2,951,134 Debt $ 5,267,896 $ 5,418,272 Financing lease liabilities 228,597 184,276 Add: Rent x 6^(1) 2,035,158 2,014,764 Adjusted debt $ 7,531,651 $ 7,617,312 Adjusted debt to EBITDAR 2.0 2.6 Adjusted Return on Invested Capital (ROIC)(in thousands, except ROIC) Trailing 4 Quarters May 8, 2021 May 9, 2020 Net income $ 2,125,000 $ 1,557,744 Adjustments: Interest expense 202,854 196,724 Rent expense^(1) 339,193 335,794 Tax effect^(2) (118,167 ) (114,492 ) Adjusted after-tax return $ 2,548,880 $ 1,975,770 Average debt^(3) $ 5,446,162 $ 5,303,066 Average stockholders' deficit^ (1,364,932 ) (1,684,662 ) (3)Add: Rent x 6^(1) 2,035,158 2,014,764 Average financing lease 227,061 184,286 liabilities^(3)Invested capital $ 6,343,449 $ 5,817,454 Adjusted After-Tax ROIC 40.2 % 34.0 % ^(1) The table below outlines the calculation of rent expense and reconcilesrent expense to total lease cost, per ASC 842, the most directly comparable GAAP financial measure, for the trailing four quarters ended May 8, 2021 andMay 9, 2020 (in thousands): Total lease cost, per ASC 842, for the trailing four quarters ended May 8, $ 421,750 2021 Less: Financing lease interest and (55,725 ) amortization Variable operating lease Less: components, related to insurance (26,832 ) and common area maintenance Rent expense for the trailing four $ 339,193 quarters ended May 8, 2021 Total lease cost, per ASC 842, for the $ 286,626 36 weeks ended May 9, 2020 Financing Less: lease (42,172 ) interest and amortization Variable operating lease Less: components, related to insurance (17,127 ) and common area maintenance Rent expense for the 36 weeks ended $ 227,327 May 9, 2020 Rent expense for the 17 weeks Add: ended August 31, 2019 as 108,467 previously reported prior to the adoption of ASC 842 Rent expense for the trailing four $ 335,794 quarters ended May 9, 2020 ^(2) Effective tax rate over trailing four quarters ended May 8, 2021 and May 9, 2020 is 21.8% and 21.5%, respectively^(3)All averages are computed based on trailing 5 quarter balances Other Selected Financial Information(in thousands) May 8, 2021 May 9, 2020 Cumulative share repurchases ($ $ 24,832,432 $ 22,354,110 since fiscal 1998)Remaining share repurchase 1,317,568 795,890 authorization ($) Cumulative share repurchases 149,696 147,696 (shares since fiscal 1998) Shares outstanding, end of 21,620 23,348 quarter 12 Weeks Ended 12 Weeks Ended 36 Weeks 36 Weeks Ended Ended May 8, 2021 May 9, 2020 May 8, May 9, 2021 2020 Depreciation and amortization $ 94,017 $ 91,695 $ 278,044 $ 272,115 Capital spending 137,009 83,325 375,653 273,888

AutoZone's 3rd Quarter Highlights - Fiscal 2021 Selected Operating HighlightsCondensed Consolidated Statements of Operations Store Count & Square Footage 12 Weeks Ended 12 Weeks Ended 36 Weeks Ended 36 Weeks Ended May 8, 2021 May 9, 2020 May 8, 2021 May 9, 2020 Domestic: Beginning 5,951 5,815 5,885 5,772 stores Stores opened 25 21 91 64 Stores closed (1 ) - (1 ) - Ending domestic 5,975 5,836 5,975 5,836 stores . Relocated 6 1 11 1 stores Stores with commercial 5,107 4,950 5,107 4,950 programs Square footage 39,175 38,223 39,175 38,223 (in thousands) Mexico: Beginning 628 608 621 604 stores Stores opened 7 2 14 6 Ending Mexico 635 610 635 610 stores Brazil: Beginning 46 38 43 35 stores Stores opened 1 - 4 3 Ending Brazil 47 38 47 38 stores Total 6,657 6,484 6,657 6,484 Square footage 44,253 43,045 44,253 43,045 (in thousands) Square footage 6,648 6,639 6,648 6,639 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(Domestic, Mexico and May 8, 2021 May 9, 2020 May 8, 2021 May 9, 2020 Brazil) Sales per $ 541 $ 421 $ 2,134 $ 1,856 average store Sales per average square $ 81 $ 63 $ 321 $ 280 foot Total Auto Parts(Domestic, Mexico and Brazil) Total auto $ 3,590,281 $ 2,724,604 $ 14,024,674 $ 11,849,892 parts sales % Increase vs. 31.8 % -0.3 % 18.4 % 5.5 % LY Domestic Commercial Total domestic commercial $ 828,569 $ 573,786 $ 3,138,398 $ 2,638,710 sales % Increase vs. 44.4 % -6.7 % 18.9 % 9.6 % LY Average sales per program $ 13.5 $ 9.7 $ 12.0 $ 10.2 per week % Increase vs. 39.2 % -9.3 % 17.6 % 5.2 % LY All Other, including ALLDATA All other $ 60,742 $ 54,695 $ 237,395 $ 224,542 sales % Increase vs. 11.1 % 7.0 % 5.7 % 8.7 % 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 $6K, respectively 12 Weeks Ended 12 Weeks Ended 36 Weeks Ended 36 Weeks Ended May 8, 2021 May 9, 2020 May 8, 2021 May 9, 2020 Domestic same 28.9 % (1.0 %) 19.0 % 0.5 % store sales InventoryStatistics (Total Stores) as of as of May 8, 2021 May 9, 2020 Accounts payable/ 123.9 % 108.2 % inventory ($ in thousands) Inventory $ 4,665,477 $ 4,440,602 Inventory per 701 685 store Net inventory (net of (1,112,745 ) (365,727 ) payables) Net inventory (167 ) (56 ) / per store Trailing 5 Quarters May 8, 2021 May 9, 2020 Inventory 1.5 x 1.3 x turns