With sales to mom-and-pop shops leading the way, AutoZone reported continued momentum in its commercial business, which set the pace for a strong first quarter of its fiscal 2020.
Overall, AutoZone reported net sales of $2.8 billion for its fiscal first quarter, a nearly 6% year-over-year increase. Domestic same-store sales – sales for stores open at least one year – increased 3.4% for the quarter, which ended Nov. 23.
AutoZone’s total commercial sales grew 13.6%. Achieving double-digit year-over-year growth was no easy task, considering the company’s commercial sales grew 11.3% in its fiscal first quarter of 2019, CEO Bill Rhodes noted.
“Our team across the organization – from our sales team to our operators, merchants, technologists, marketers, credit team to ALLDATA and on and on – have really bought into providing a compelling, differentiated, comprehensive experience for our customers, and with that approach we are being rewarded with incremental business in the marketplace by our customers,” Rhodes said during AutoZone’s Dec. 10 conference call. “While we remain smaller than many of our peers in absolute sales volume, our growth rate has been very robust, growing about three times the industry growth rate.”
AutoZone has a commercial program in 4,917 U.S. stores – 85% of its domestic stores – and its commercial growth accelerated despite the company averaging fewer annual program openings than it did in the first of quarter of fiscal 2019. For the third consecutive quarter, sales per commercial program averaged more than $10,000. During the conference call, Rhodes noted most of AutoZone’s commercial growth is coming from existing customers, as the customer is “penetrating those customers much deeper than we were before.”
“ … Our up-and-down-the-street business – otherwise known as the independent repair shops – grew faster than our overall commercial business, indicating that the improvements we are making are broad-based across different geographies and customer types,” he added. “Our AutoZoners have taken ownership of our success and are adding value to our commercial customers, which has and will continue to have a very positive impact on the business.
“That said, we believe there [are] still considerable growth opportunities for us in commercial, as our market share remains small.”
In the first quarter, commercial sales represented 22% of AutoZone’s total sales, increasing $75 million over first-quarter 2019. Rhodes attributed the growth to a number of initiatives, including inventory-assortment improvements, hub and megahub expansions “the ever-strengthening reputation of the Duralast brand across our professional customer base.”
“We don’t know what’s going to happen in the future, but we do know that we have several other initiatives in front of us on the commercial front – particularly technology initiatives – that we have not rolled out yet, and we’re excited about what the prospects of those initiatives will mean in the future,” Rhodes said during the Q&A session.
AutoZone’s domestic DIY business grew year-over-year and generated positive same-store sales results. As Rhodes has said in previous conference calls, AutoZone’s DIY business continues to be “a predictable revenue stream and substantial profit and cash-flow generator.”
“All months of our quarter showed positive DIY same-store sales, and we saw our best performance versus the previous year in November,” Rhodes noted.
During the quarter, AutoZone opened 18 new stores in the United States, two in Mexico and two in Brazil. As of Nov. 23, the company had 5,790 stores in the United States, 606 stores in Mexico and 37 stores in Brazil for a total store count of 6,433.