If auto-parts retailer AutoZone
While those same-store sales hardly moved, AutoZone just missed boosting revenues to match analyst expectations, reporting sales of $1.47 billion. Analysts expected revenues of $1.48 billion. Profits, though, were strong, rising 5% on the back of selling more private-label Duralast products, which tend to be more profitable for the retailer. Net income rose to $151.6 million, or $2.17 per share.
Per-share earnings profited handsomely from the company's prolonged share-buyback program. Like last quarter, earnings per share jumped 15% as the auto parts company ratcheted up a repurchase of another 1.9 million shares. So far this year, the Motley Fool Inside Value recommendation has bought back 3.8 million shares, providing a hydraulic boost to per-share profits.
As I did last quarter, I continue to wonder whether the stock repurchases are the best use of shareholder money and if it wasn't putting itself in the danger zone by focusing on buybacks. Capital spending continues to decline, down another 16% this quarter and off 13% for the first nine months of the fiscal year. Admittedly, though, and considering its prodigious ability to generate cash, AutoZone's return on invested capital continues to grow, rising 50 basis points to 22.7% over the last four quarter. Its ROIC also well exceeds that of rivals Advanced Auto Parts
AutoZone remains a key component of Eddie Lampert's holdings, amounting to 30% of the company's shares outstanding. Lampert's ESL Partners also operates Sears Holding
With many analysts forecasting even higher gas prices for the summer, weakness is expected on the road ahead for AutoZone. Yet with more cars on the road (AutoZone considers the number of cars seven years and older to be a key determinant of market growth), it can offset a decline in the other component of future prospects of miles driven. January and February were down, while March was up, and April's figures have not yet been released.
Weather can also play with results, and where retailers were benefiting from the early warmth of March, that reversed with the coldest April in 10 years. AutoZone itself saw the first two weeks of the month create what it termed "disappointing sales."
Cold weather and declining numbers of miles driven may have been what kept same-store sales down. While a flashy new computer system -- AutoZone calls it Z-net -- can making shopping easier for its customers, it's going to have to get them into the stores first to use it. Otherwise, the auto parts retailer's stock will stall.
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AutoZone is a former Motley Fool Inside Value recommendation. A 30-day trial subscription will show you how lead analyst Philip Durell outperforms the market to the finish line.