UPDATE: AutoZone 3Q Net Up 9.5%, Helped By Cost-Conscious Mechanics
28 May 2009 - 7:17AM
Dow Jones News
AutoZone Inc. (AZO) said Wednesday that maintenance products now
account for half of U.S. retail sales, as the average age of cars
on the road increases.
Executives at the largest U.S. auto parts retailer said there
had been a shift towards maintenance products from discretionary
and essential purchases in its sales mix.
Bill Rhodes, CEO, said he expected the average age of the cars
on U.S. roads was close to 10 years amid the sharp slowdown in
new-vehicle sales.
His comments came as the company reported a 9.5% increase in its
third-quarter net income.
The Memphis-based company said it earned $173.7 million, or
$3.13 per share, an increase from $158.6 million, or $2.49 per
share, a year ago.
Shares closed the day down 4.8%, to $155.04, on Wednesday, as
investors banked on AutoZone outpacing the results of its
competitors, O'Reilly Automotive Inc. and Advance Auto Parts Inc.
(AAP).
O'Reilly reported a 36% increase in its fiscal first-quarter net
income in April while Advanced had a bigger-than-expected 14%
earnings jump.
Rhodes cautioned analysts that the company was planning for
conservative growth rate although consumers are holding onto their
cars longer.
"The automotive after-market industry association has
historically reported overall growth of approximately 4%," Rhodes
said on a conference call. "We would encourage everyone to plan
growth trends at more reasonable, and more historical, levels."
Auto repair company investors appear to be waiting for a
windfall as consumers keep their cars longer amid the recession. In
addition, General Motors Corp. (GM) and Chrysler LLC are preparing
to close hundreds of dealerships, thereby eliminating service bays
in markets.
"As important as our string of 11 straight quarters of double
digit earnings per share growth has proven we don't have to achieve
these levels of accelerated same-store sales growth to deliver
strong growth and earnings per share," Rhodes said.
The company said same-store sales, or sales open at stores at
least a year, rose more than 7% during the quarter. The metric is
important among retailers because it measures performance at
existing, rather than newly opened, stores.
AutoZone's net sales rose 9.3% to $1.66 billion, with U.S.
same-store sales up 7.4%. Analysts surveyed by Thomson Reuters were
expecting earnings of $2.89 a share on revenue of $1.61
billion.
Rhodes said the company is pushing ahead with its "super hub"
concept, where one stores is stocked with more items which it then
ships to surrounding stores when needed. "These super hubs have
three distinct purposes. Improved market based coverage, improved
in stock levels in satellite stores through daily replenishment
when necessary, and finally, reduction in excess inventory
throughout the network by reducing the need for all stores to carry
select products," Rhodes said.
-By Jeff Bennett, Dow Jones Newswires; 248-204-5542;
jeff.bennett@dowjones.com