Upbeat report boosts Autozone’s stock
Autozone Inc.’s stock price continued its rebound Wednesday following an upbeat sales report for the last quarter.
The Memphis-based retailer’s aftertax profits fell 15.5% to $342.9 million for the quarter, compared to $405.9 million in the same period last year.
Despite the fall in profits, Wall Street analysts saw better-than-expected performances, pointing to a continued trend in the present quarter for the country’s largest auto parts retailer, which operates more than 6,000 stores in the United States, Mexico and Brazil.
Sales at stores open at least one year declined by only 1% and overall sales revenue decreased 0.1% to $2.8 billion for its third quarter that ended May 9, the company reported.
By midday Wednesday, traders pushed Autozone’s stock price up to $1,147.51 per share, a gain of 2.1% over the closing price Tuesday, and up from less than $750 per share in late March. At that time, traders sold off retail stocks as cities and states ordered nonessential businesses closed, leading to 33 million layoffs nationwide.
Autozone adjusts during ‘extreme volatility’ of COVID-19
Considered a recession-proof stock in earlier years, thanks to people keeping older cars running, Autozone remained open as an essential business amid the lockdown although hours were shortened at many locations for the company’s 96,000 employees.
A decline in Autozone sales in March was reversed in April. By then, $1,200 federal stimulus checks reached households throughout the nation and $600 in supplemental unemployment compensation began flowing to idled workers.
“During the third quarter, we experienced the most extreme fluctuations in sales, both negative and positive, in the company’s more than 40-year history,” Autozone Chairman Bill Rhodes said. “Because of this extreme volatility and uncertainty around the continued effects of the virus and government and consumer responses, it is difficult for us to forecast short-term results with any degree of confidence. But our team has proven yet again that we can flex our business quickly in this dynamic environment ...”
Autozone set up financial deals to tap money if it is needed to get through tight times. The company sold $1.25 billion worth of unsecured senior notes and added $750 million in potential borrowing if needed over the next year to its $2 billion undrawn multi-year credit facility.
“For the remainder of the year, we will focus on our strategic initiatives of delivering great service, further penetrating the commercial market, enhancing inventory assortments, improving local market expanded parts availability and leveraging technology to improve efficiencies,” Rhodes said in a statement released by the company. “We will continue to manage this business for the long-term and will invest capital using our disciplined approach all with the focus on delivering great service, terrific opportunities for our Autozoners and ultimately strong returns for our investors while supporting the communities we serve.”
During the quarter, Autozone opened 21 stores in the United States and two in Mexico, bringing the chain to 6,484 stores in total — including 5,836 in the U.S., 610 in Mexico, 38 in Brazil and a fleet of distribution centers.
“I am extraordinarily proud of our team, across the company, for their commitment to helping our customers during these unprecedented times,” Rhodes said. “But I especially want to recognize and praise our store and distribution center Autozoners. These remarkable people have done an incredible job throughout this time.”