ORLY O Reilly Automotive Inc

AutoZone Inc. (AZO) reported a 15.2% rise in earnings per share to $4.78 in second-quarter fiscal 2013 (ended Feb 9, 2013) from $4.15 in the year-ago quarter. The results surpassed the Zacks Consensus Estimate by 4 cents. Net income went up 5.6% to $176.2 million from $166.9 million in the year-ago quarter.

The company’s revenues for the quarter increased 2.8% to $1.86 billion, marginally missing the Zacks Consensus Estimate of $1.88 billion. Domestic same-store sales (sales for stores open at least one year) decreased 1.8% in the quarter.

Gross profit increased 3.9% to $962 million or 51.9% of sales from $926.2 million or 51.3% in the year-ago quarter. The year-over-year growth in margins was attributable to reduction in acquisition costs.

Operating income climbed 5.6% to $317.6 million from $300.7 million in the second quarter of fiscal 2012. Operating expenses increased 3% to $644.4 million or 34.7% of sales versus $625.6 million or 34.7% a year ago. The higher operating expenses were due to lower sales, partially offset by lower incentive compensation.

Store Opening and Inventory

AutoZone opened 32 new stores in the U.S, and 9 new stores in Mexico. As of Feb 9, 2013, the company had 4,735 stores in 49 states, the District of Columbia and Puerto Rico in the U.S., 334 stores in Mexico and one store in Brazil.

The company’s inventory grew 7% in the quarter, driven by an improvement in store count and continued strategic investments in hard parts assortment. Inventory per store increased a mere 2.6% to $544,000 from $530,000 in the corresponding quarter of last year.

Share Repurchase

During the quarter, AutoZone repurchased 513,000 shares for $185 million, reflecting an average price of $361. The company had $603 million worth of shares remaining for repurchase at the end of the second quarter.

Financial Details

AutoZone had cash and cash equivalents of $115.5 million as of Feb 9, 2013, up from $103.2 million as of Feb 11, 2012. Total debt amounted to $4 billion as of Feb 9, 2013, compared with $3.5 billion as of Feb 11, 2012. The company had a stockholder deficit of $1.6 billion as of Feb 9, 2012, up from $1.3 billion as Feb 11, 2012.

During the first six months of fiscal 2013, the company generated net cash flow of $285.3 million before share repurchases and changes in debt compared with $374.2 million in the same period a year ago. Capital spending increased to $169.6 million from $132.4 million in the first half of fiscal 2012.

Our Take

AutoZone is a leading retailer and distributor of automotive replacement parts and accessories with stores located in the U.S. and Mexico. The company is focused on aggressive share repurchase program along with expansion of hub stores. The company currently retains a Zacks Rank #3 (Hold).

Advance Auto Parts Inc. (AAP), another leading retailer and distributor of automotive replacement parts and accessories, posted a 2.2% decrease in earnings per share to 88 cents in the fourth quarter of 2012 from 90 cents in the year-ago quarter. However, it surpassed the Zacks Consensus Estimate by 13 cents. Revenues remained flat year over year at $1.3 billion, in line with the Zacks Consensus Estimate.

Few stocks that are also performing well in the industry where AutoZone operates are O’Reilly Automotive Inc. (ORLY) and CarMax Inc. (KMX). Both carry a Zacks Rank #2 (Buy).
 

 
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