AutoZone (AZO) Approves Further Share Buyback on Solid Results
AutoZone, Inc.’s AZO board of directors recently authorized the buyback of an additional $1.5 billion of the company’s common stock related to its ongoing share-repurchase program.
The company commenced its share-repurchase program in 1998. AutoZone’s board has authorized $24.650 billion in share repurchases in total till date, including the above amount. AutoZone had tapped brakes to the program amid the coronavirus-induced uncertainty. The company resumed its share-buyback program in first quarter of fiscal 2021, boosting investors' confidence.
The company’s robust financial performance during the last reported quarter (first quarter of fiscal 2021) helps it repurchase additional stock, while maintaining its investment grade credit ratings. AutoZone reported diluted earnings of $18.61 per share for the first quarter of fiscal 2021 (ended Nov 21, 2020), up from the prior-year figure of $14.3. Net sales during the last reported quarter also increased 12.9% year on year to $3,154.3 million.
Moreover, the company is dedicated to using the proceeds from the share repurchase to boost shareholders’ value, while at the same time maintaining sufficient liquidity which provides adequate financial flexibility.
AutoZone is one of the leading specialty retailers, and distributor of automotive replacement parts and accessories in the United States. It operates in the Do-It-Yourself (DIY) retail, Do-It-for-Me auto parts and products markets.
The company has been generating record revenues since 29 consecutive years on stable growth in the auto parts market and expansion of the store base. AutoZone has benefited from the growing market presence of DIY retail and commercial businesses. Store-expansion initiatives, fast delivery and high-quality products are boosting the company’s market share. As of Nov 21, 2020, the company had 5,924 stores in the United States, 621 stores in Mexico, and 45 stores in Brazil for a total store count of 6,590.
AutoZone’s omni-channel efforts to improve customer shopping experience are reaping profits. Rising e-commerce efforts, especially during the coronavirus pandemic, are aiding the company’s top-line growth. Ship-to-home next day, buy online, pick-up in stores and commercial customer ordering are picking pace, driving traffic to the company’s online site.
Moreover, the company’s solid liquidity profile is helping it sail through the pandemic. Notably, it had cash and cash equivalents of $1,664 million as of Nov 21, 2020, up from $158.1 million on Nov 23, 2019. AutoZone has also initiated a series of cost-saving initiatives throughout the enterprise, including substantial staffing adjustments and addition to revolving credit facilities. The focus on cost discipline is anticipated to provide some respite amid the pandemic-induced financial crisis.
However, AutoZone’s elevated debt levels is a cause of concern. Also, the company expects operating expenses to flare up in the upcoming years thanks to opening of distribution centers, mega hubs and stores; technology investments; along with accelerated wage pressure.
AutoZone, peers of which include Advance Auto Parts AAP, CarMax KMX and O’Reilly Automotive Inc ORLY, currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Shares of the company have declined 1% year to date, while its industry has witnessed a fall of 0.5%.
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