U.S. aftermarket retailer and distributor AutoZone, Inc. reported net sales of $2.6 billion for its first quarter (12 weeks) ended November 17, 2018, an increase of 2.0% from the first quarter of fiscal 2018 (12 weeks). Domestic same store sales, or sales for stores open at least one year, increased 2.7% for the quarter.
Net income for the quarter increased 25.1% over the same period last year to $351.4 million, while diluted earnings per share increased 34.7% to $13.47 per share from $10.00 per share in the year-ago quarter. Net income and diluted earnings per share benefitted from a lower effective income tax rate, primarily due to Tax Reform.
All figures in USD.
For the quarter, gross profit, as a percentage of sales, was 53.7% (versus 52.8% for the same period last year). The increase in gross margin was primarily attributable to the impact of the sale of two businesses completed in the prior year (65 bps) and higher merchandise margins. Operating expenses, as a percentage of sales, were 35.2% (versus 34.6% the same period last year), with deleverage primarily driven by domestic store payroll (56 bps).
Under its share repurchase program, AutoZone repurchased 654 thousand shares of its common stock for $497.1 million during the first quarter, at an average price of $760 per share. At the end of the first quarter, the Company had $985 million remaining under its current share repurchase authorization.
The Company’s inventory increased 2.0% over the same period last year, driven by new stores and increased product placement, partially offset by the impact of the sale of two businesses completed in the prior year. Inventory per location was $658 thousand versus $663 thousand last year and $636 thousand last quarter. Net inventory, defined as merchandise inventories less accounts payable, on a per location basis, was a negative $59 thousand versus negative $52 thousand last year and negative $75 thousand last quarter.
“I want to thank all AutoZoners across the company for their tremendous efforts during our first fiscal quarter. Their dedication and commitment to superior service resulted in a strong start to our new year. As we entered the quarter, we knew we had difficult comparisons to last year’s first quarter due to the prior year’s sales benefit from three major hurricanes. Our team delivered very solid performance in DIY and our Commercial growth accelerated again reaching our highest growth since 2015. Our industry fundamentals remain strong and we continue to be excited about the initiatives we have underway to further enhance our inventory availability, to continue to accelerate commercial and to meet our customers how, when and where they want to be met with our omni-channel initiatives. As we continue to invest in our business, we remain committed to our disciplined approach of increasing operating earnings and cash flow, and utilizing our balance sheet and capital effectively,” said Bill Rhodes, Chairman, President and Chief Executive Officer.
During the quarter ended November 17, 2018, AutoZone opened 13 new stores and relocated one store in the U.S. and opened three new stores in Mexico. As of November 17, 2018, the Company had 5,631 stores in 50 states in the U.S., the District of Columbia and Puerto Rico, 567 stores in Mexico, and 20 stores in Brazil for a total store count of 6,218.