AutoZone Falls Short of Market Expectations with $32.52 EPS for Q1 FY’25
AutoZone, Inc. (NYSE: AZO) reported a modest start to its fiscal year 2025, with net sales reaching $4.3 billion for the first quarter ending November 23, 2024. This marks a 2.1% increase compared to the same period in the previous year.
The company’s domestic same-store sales saw a slight uptick of 0.3%, while international same-store sales grew by 1.0%, resulting in a total company same-store sales increase of 0.4%. The total company same-store sales rose by 1.8% when adjusted for constant currency.
The company’s gross profit margin improved slightly, rising by 16 basis points to 53.0%, driven by higher merchandise margins. However, operating expenses also increased, representing 33.3% of sales compared to 32.6% last year.
This led to a slight decline in operating profit, which fell by 0.9% to $841.1 million. Net income for the quarter was $564.9 million, a decrease from $593.5 million in the same quarter last year. Diluted earnings per share were reported at $32.52, marginally down from $32.55 in the previous year.
AutoZone’s inventory levels increased by 8.7% compared to the same period last year, with net inventory per store at negative $166,000, a slight improvement from negative $197,000 the previous year. The company also continued its aggressive stock repurchase program, buying back 160,000 shares at an average price of $3,156 per share, amounting to a total investment of $505.2 million. As of the quarter’s end, AutoZone had $1.7 billion remaining under its current share repurchase authorization.
AutoZone’s First Quarter EPS Short of Expectations, Revenue in Line
The first quarter results for AutoZone fell short of market expectations. Analysts had anticipated earnings per share (EPS) of $33.6, whereas the company reported an EPS of $32.52.
This shortfall highlights challenges the company faced during the quarter, including increased operating expenses and a slight decline in net income. Despite meeting the revenue expectation of $4.3 billion, the EPS miss suggests that cost management and profitability were areas of concern.
The domestic market, a significant contributor to AutoZone’s overall performance, showed limited growth with same-store sales increasing by just 0.3%. This was below the previous year’s growth rate of 1.2% for the same period. International operations provided a brighter spot, with constant currency same-store sales increasing by 13.7%, although unfavorable currency fluctuations impacted reported sales.
AutoZone’s commercial sales in the domestic market rose by 3.2%, a positive sign, but still a deceleration from the previous year’s growth rate of 5.7%. The company’s efforts to expand its store footprint, with 34 new stores opened during the quarter, indicate a strategic focus on growth despite the mixed performance metrics.
However, the overall sales per average store and per average square foot saw a slight decline compared to the previous year.
AutoZone Remains Optimistic About Growth Prospects for FY’25
AutoZone remains optimistic about its growth prospects for the remainder of the fiscal year. The company plans to continue expanding its store network, particularly in international markets, where performance has been encouraging. The focus on improving customer service and increasing market share is central to AutoZone’s strategic initiatives. The company’s leadership expressed confidence in the existing strategies to drive earnings growth and enhance operating cash flow.
AutoZone’s management reiterated its commitment to delivering shareholder value through disciplined capital allocation, including ongoing share repurchases. The company views its capital structure as crucial to maintaining investment-grade credit ratings, which supports its ability to finance growth initiatives and manage debt levels effectively.
The company is also closely monitoring external factors that could impact its performance, such as changes in fuel prices, competition, and economic conditions. AutoZone’s management acknowledges the potential risks and uncertainties that lie ahead, including currency fluctuations and supply chain disruptions. However, the company believes that its proactive measures and strategic focus will position it well to navigate these challenges and capitalize on growth opportunities.
Disclaimer: The author does not hold or have a position in any securities discussed in the article.
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