AutoZone (AZO) Q4 1997 earnings summary

Executive summary

• FY1997 net sales rose 20% to $2.691B; net income increased 17% to $195.0M and EPS rose 15% to $1.28, despite comparison with a 53-week FY1996.

• Opened 305 net new stores, ending FY with 1,728 stores in 32 states; comparable-store sales increased 8%.

• Commercial sales became profitable and exceeded 10% of sales; management expects continued growth in commercial to support same-store sales and earnings.

Financial highlights

• FY1997 sales $2,691.4M, up 20%; operating profit $321.4M, up 19%; net income $195.0M, up 17%; EPS $1.28, up 15%.

• Gross profit was $1,132.1M, or 42.0% of sales, versus 41.7% in FY1996; operating profit margin was 11.9% versus 12.0%.

• SG&A rose to 30.1% of sales from 29.7%; net interest expense increased to $8.8M from $2.0M, primarily due to higher borrowings.

• Q4 FY1997, a 16-week period: sales $946.4M, comparable-store sales +8%, operating profit $133.5M, net income $81.5M and EPS $0.53.

Outlook and guidance

• Plans called for ~350 store openings in FY1998, with total store square footage expected to increase ~22%; 52 stores were under construction at FY1997 year-end.

• Fiscal 1998 new and replacement stores of 6,600 sq. ft. or larger were expected to exceed 85% of openings.

• Management expected commercial sales to continue favorably affecting same-store sales and earnings, while maintaining focus on the core DIY business.

• Capital spending and working capital needs were expected to be funded primarily with internally generated cash, with borrowings covering the balance.