In an SEC filing on Thursday, auto parts retailer AutoZone (AZO +0.03%) informed investors that the duration of the COVID-19 pandemic remains a significant unknown impacting its business. The nationwide auto maintenance brand also stated that it has created contingency plans surrounding merchandise categories management deems to be at risk of supply disruption, including items sourced from China and other coronavirus-affected areas.
AutoZone provided clarity on its current store status following a wave of temporary store closures across the retail spectrum in recent days, stating: "Currently, substantially all of our stores, including stores located in jurisdictions where travel restrictions and 'stay-at-home' orders have been imposed, remain open, with most traditional non-hub stores temporarily operating on limited hours. Our online sales channel continues to operate as normal."
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The organization reported its latest earnings results on March 3, and though same-store sales decreased by 0.8% during the quarter ended Feb. 20, 2020, this was more a function of the weather crimping store traffic than any early COVID-19 headwinds.
Undoubtedly, the current quarter (fiscal third quarter of 2020) will look quite different. Just how much sales and margins will be impacted is difficult to model. Naturally, keeping stores running is beneficial to the top line, but as road traffic temporarily withers due to mass closures, quarantines, and shelter-in-place orders, vehicle maintenance may prove to be a low priority for a temporarily home-bound population.
Thus, management is preparing for at least some adversity: AutoZone also noted in its filing today that it's "contemplating" signing onto a new, 364-day revolving credit facility of up to $750 million. The company will report its next earnings results in early June.
