AutoZone Q3 Profit Rises, But Results Miss View

(RTTNews) - Automotive parts retailer AutoZone, Inc. (AZO) on Tuesday reported a 6 percent increase in profit for the third quarter from last year, reflecting growth in sales and higher inventory on new store openings. However, both revenue and earnings per share for the quarter missed analysts' expectations.

AutoZone's net income for the third quarter increased to $327.52 million or $10.77 per share from $309.07 million or $9.57 per share in the previous-year quarter.

The company noted that the latest quarter's results were impacted by a legal charge along with a discrete tax benefit, which netted to a reduction to earnings per share of $0.11 per share.

On average, 21 analysts polled by Thomson Reuters expected the company to report earnings of $10.92 per share for the quarter. Analysts' estimates typically exclude special items.

Net sales for the quarter grew 4 percent to $2.60 billion from $2.49 billion in the prior-year quarter. Analysts were looking for revenue of $2.65 billion.

The company noted that sales were below its expectations as weather negatively impacted sales primarily in Midwestern, Middle Atlantic, and Northeastern states.

Domestic same store sales, or sales for stores open at least one year, grew 2.0 percent for the quarter, compared to 2.3 percent in the year-ago period.

Gross margin for the quarter edged up to 52.8 percent from 52.3 percent last year. The improvement in gross margin reflects higher merchandise margins, partially offset by higher supply chain costs associated with current year inventory initiatives.

AutoZone's inventory increased 3.7 percent from last year, driven primarily by new store openings over the last twelve months.

At the end of the quarter, the company expanded its increased frequency of distribution center deliveries initiative to 1,600 domestic AutoZone stores and expect by the end of the fiscal year to be servicing approximately 2,000 of its over 5,000 domestic AutoZone stores.

The company also plans to open approximately four additional Mega Hubs by the end of the fiscal year to finish with a total of 11.