Release Date: December 10, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- AutoZone Inc (AZO, Financial) reported a 2.1% increase in total sales for the quarter, with international same-store sales up 13.7% on a constant currency basis.
- The company opened 23 net domestic stores and 11 international stores, showing commitment to expanding its footprint.
- AutoZone Inc (AZO) continues to invest in growth initiatives, including hubs and mega hubs, which are expected to drive future sales growth.
- The company maintained strong gross margins, with a 16 basis point improvement, driven by merchandising margin improvements.
- AutoZone Inc (AZO) remains a strong cash flow generator, with $565 million in free cash flow for the quarter, allowing for continued share repurchases and investments.
Negative Points
- Earnings per share decreased by 0.1%, impacted by foreign exchange headwinds, which reduced EPS by approximately $0.68 per share.
- Domestic same-store sales growth was muted at 0.3%, with DIY sales down 0.4%, reflecting cautious consumer spending.
- The company faced a significant currency headwind, with a $58 million impact on sales and a $17 million impact on EBIT due to a stronger US dollar.
- SG&A expenses increased by 4.5%, leading to a 75 basis point deleverage as a percentage of sales.
- AutoZone Inc (AZO) experienced a decline in DIY transaction counts by 1.8%, indicating challenges in consumer traffic.
Q & A Highlights
Q: Could you talk about what you're seeing on the West Coast as one of your peers is shutting stores and exiting that region? How do you see inventory liquidation and any price disruption?
A: It's early in the process, and as they close stores, they've increased discounting. Over time, we expect to benefit from market share gains as they exit. In the short term, there might be a slight headwind due to discounted prices, but long-term, it's a great opportunity for us.
Q: Can you discuss the cadence of the first quarter into the second quarter, especially regarding commercial sales and the impact of winter weather?
A: The first four weeks were the weakest due to hurricanes affecting the southeast markets, impacting commercial sales. As the quarter progressed, sales returned to normal volumes. It's early in the second quarter, but initial winter conditions are promising, though we need consistent cold and precipitation for a significant impact.
Q: Regarding operating income growth, if the sluggish macro environment persists, can you maintain EBIT growth, or will you need to invest more, potentially lowering it?
A: We expect comps to improve throughout the year, supported by inventory and infrastructure positioning. Gross margins should remain strong, and we will manage SG&A in a disciplined way. We plan to invest in growth opportunities without negatively impacting operating income.
Q: How did the shift in your same-store sales measurement due to the extra week last year impact your comp this quarter, and how will it play out over the next few quarters?
A: The shift negatively impacted comps by about 1 point this quarter. We expect to see a positive impact later in the spring, potentially reversing the drag in the third and fourth quarters.
Q: Can you provide insights into the international business, particularly the performance in Mexico and Brazil?
A: We don't break out sales by region, but international markets, especially Mexico, are performing well. Growth is driven by exporting domestic strategies and focusing on commercial opportunities. We expect continued acceleration in store count and productivity.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
