While sales growth nearly stalled at 3% during the second quarter, AutoZone (NYSE: AZO) drove in per-share profits that revved up 15% on improved margins and a lower share count.  

Category-management initiatives and direct import efforts contributed to a 71-basis-point improvement in the gross margin, helping to offset product-cost increases. And despite rising operating expenses, the operating margin inched up 17 basis points to 14.7%.

Of course, the typical earnings report never tells the full story. AutoZone excels at capital management, and its disciplined approach has produced a return on invested capital of 23.2% in the last 12 months.

Furthermore, the company is miles ahead of its competitors in using pay-on-scan to keep net inventory squeaky clean. Accordingly, inventory net of vendor payables was $55,000 per store at quarter's end, down 13% from the previous year's second quarter.

In the ongoing debate over dividends versus share repurchases, AutoZone knows which side its bread is buttered on. Free cash flow approaching $10 per share has allowed the company to buy back more than 10% of its outstanding share base in the past four quarters, turning single-digit operating earnings growth into double-digit EPS expansion.

As revenue growth skidded to a slower pace recently, some fellow Fools have suggested that AutoZone may be entering the danger zone. But while conventionally minded competitors like O'Reilly (Nasdaq: ORLY) and Advance Auto Parts (NYSE: AAP) bicker over who wins the bid for CSK Automotive (NYSE: CAO) and see their profits hit speed bumps, AutoZone calmly sits on solid cruise-controlled growth.

This strategy may not be ideal for all retail companies, but in the crowded field of auto parts, it seems to me that it's working to the tee. In fact, at the current pace, I wouldn't mind being the only AutoZone shareholder left standing a year down the road.

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Fool contributor Timothy M. Otte surveys the retail scene from Dallas. He welcomes comments on his articles, but doesn't own shares of any of the companies mentioned in this article. AutoZone is a Motley Fool Inside Value selection. The Fool's disclosure policy is a personal friend of Herbie the Love Bug.