AutoZone reported net sales of $4.2 billion for its first quarter of fiscal 2024, a 5.1% year-over-year increase.
Same-store sales were up 3.4% in the quarter, which ended on Nov. 18.
Operating profit increased 17.4% to $848.6 million. Net income for the quarter increased 10% over the same period last year to $593.5 million, while diluted earnings per share increased 18.6% to $32.55.
“Our leadership team and I continue to be impressed with our post-pandemic sales performance,” AutoZone CEO Bill Rhodes said during the company’s Dec. 5 earnings conference call. “To put this in perspective, our FY 2019 sales were $11.6 billion, and now our trailing four-quarter sales are $17.7 billion – a 50%-plus increase over a four-year time horizon.”
Domestic commercial sales were up 5.7%, while domestic retail sales were flat, according to company executives on the call.
“Our performance in retail was slightly below our expectations, but still resilient in the current environment,” Rhodes said.
A mild start to the winter in some areas of the country dinged DIY sales. The weather impact played out in “a 70-basis-point performance gap between the Northeast and Midwestern markets versus the rest of the country,” according to Rhodes.
“This year, October was warmer than last year, and sales in weather-sensitive hard-part categories in the Midwest and the Northeast underperformed the remainder of the country,” explained Phil Daniele, who will succeed Rhodes as CEO in January. “ … As a reminder, historically extreme weather – either hot or cold – drives parts failures and accelerated maintenance.”
Inflation was another headwind in the DIY space. Sales-floor categories underperformed hard parts, according to Daniele, “as we saw more discretionary pullback from customers.”
“We do feel the low-end consumer started pulling back on discretionary purchases,” Daniele added. He noted that company expects inflation to remain at similar levels in its fiscal second quarter, as the industry is migrating back to pre-pandemic inflation levels, lapping very high inflation from a year ago.”
He concluded: “For the second quarter, we expect our DIY sales to remain more difficult and our commercial sales trends to improve.”
Domestic commercial sales represented 30% of Auto Zone’s total domestic sales in its fiscal first quarter. Daniele attributed the DIFM strength to initiatives such as “improved satellite-store availability,” expansion of its hub/megahub network, robust Duralast-brand sales and “an intense focus on high-quality products and technological enhancements that make us easier to do business with.”
“We believe our commercial business will get stronger and growth rates should improve as we move through the year, as comps get easier and our execution will continue to improve,” Daniele added.
In January, Rhodes will transition to the role of executive chairman of the board, while Daniele will become president and CEO, as part of a transition plan announced in July. Currently, Daniele is executive vice president merchandising, marketing and supply chain.
“It will be one of the greatest honors of my life to move into that role,” Daniele said on the conference call, “and while that role will come with new opportunities and challenges, I continue to be very bullish about [our] prospects because I know we have an extraordinary culture in a terrific industry.”