AutoZone, Inc. reported net sales of $3.4 billion for its fourth quarter (16 weeks) ended August 27, 2016, an increase of 3.3% from the fourth quarter of fiscal 2015 (16 weeks). Domestic same store sales, or sales for stores open at least one year, increased 1.0% for the quarter.
Net income for the quarter increased 6.4% over the same period last year to $426.8 million, while diluted earnings per share increased 12.2% to $14.30 per share from $12.75 per share in the year-ago quarter.
For the quarter, gross profit, as a percentage of sales, was 52.8% (versus 52.5% for the same period last year). The improvement in gross margin was attributable to lower acquisition costs, partially offset by higher supply chain costs associated with current year inventory initiatives (-19 bps). Operating expenses, as a percentage of sales, were 32.1% (versus 32.2% the same period last year). The slight decrease in operating expenses, as a percentage of sales, was primarily due to the favorable comparison to last year’s higher legal costs (+30 bps), partially offset by higher store payroll.
For the fiscal year ended August 27, 2016, sales were $10.6 billion, an increase of 4.4% from the prior year, while domestic same store sales were up 2.4% for the year. Operating profit increased 5.5% on an operating margin of 19.4%. For fiscal 2016, net income increased 7.0% to $1.2 billion, while diluted earnings per share for the period increased 13.0% to $40.70 from $36.03. Return on invested capital was 31.3%, while full year cash flow before share repurchases and changes in debt was $1.167 billion.
Under its share repurchase program, AutoZone repurchased 482 thousand shares of its common stock for $370 million during the fourth quarter, at an average price of $767 per share. For the fiscal year, the Company repurchased 1.9 million shares of its common stock for $1.45 billion, at an average price of $763 per share. At year end, the Company had $395 million remaining under its current share repurchase authorization.
The Company’s inventory increased 6.1% over the same period last year, driven by new stores and increased product placement. Inventory per location was $625 thousand versus $610 thousand last year and $629 thousand last quarter. Net inventory, defined as merchandise inventories less accounts payable, on a per location basis, was a negative $80 thousand versus negative $79 thousand last year and negative $69 thousand last quarter.
“I would like to thank our entire organization for the strong performance delivered this past fiscal year. We are pleased to report our fortieth consecutive quarter of double digit earnings per share growth. Since our inception, we’ve been committed to providing superior customer service and trustworthy advice: our key points of differentiation. This commitment to our customers leads us to deliver exceptional financial performance. For the year, we reached many milestones which included generating $10.6 billion in sales, opening 156 new domestic AutoZone stores, 43 AutoZone stores internationally, and six IMC branches. Additionally, the ongoing rollout of our inventory availability initiatives, including expanding our multi-deliveries per week to stores and opening mega hub locations, has gone very well. We expect to continue with these initiatives in 2017 while expanding our supply chain network with the already announced planned openings of two or three new domestic distribution centers over the next few years. In order to continue to meet our customers’ needs across all selling channels, we continue to invest capital in our product availability initiatives across our businesses. While investing to grow, we will remain committed to our disciplined approach to increasing operating earnings and utilizing our capital effectively,” said Bill Rhodes, Chairman, President and Chief Executive Officer.
During the quarter ended August 27, 2016, AutoZone opened 71 new stores and relocated two stores in the U.S., opened 25 new stores in Mexico, and opened one new IMC branch. As of August 27, 2016, the Company had 5,297 stores in 50 states in the U.S., the District of Columbia and Puerto Rico, 483 stores in Mexico, 26 IMC branches, and eight stores in Brazil for a total count of 5,814.
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