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AutoZone Inc. (AZO - Analyst Report) reported a 23.2% rise in earnings per share to $10.42 for the fourth quarter of fiscal 2013 (ended Aug 31, 2013) from $8.46 in the year-ago quarter. Earnings surpassed the Zacks Consensus Estimate by 5 cents. Net income went up 14.7% to $371.2 million from $323.7 million in the year-ago quarter. Results include the impact of an additional week in the current quarter, excluding which earnings increased 15.4% to $9.76 and net income increased 7.4% to $347.8 million.

Quarterly revenues increased 12% year over year to $3.1 billion, in line with the Zacks Consensus Estimate. Domestic same-store sales (sales for stores open at least one year) inched up 1% in the quarter.

Gross profit increased 12% to $1.6 billion, or 51.8% of sales, from $1.4 billion, or 51.8% of sales, in the year-ago quarter. The year-over-year growth in margins due to reduction in acquisition costs was offset by the AutoAnything acquisition.

Operating profit climbed 13.6% to $636.2 million from $560.1 million in the fourth quarter of fiscal 2012. Operating expenses increased 11% to $968.2 million, or 31.3% of sales, versus $872.3 million, or 31.6% of sales, a year ago. The marginal decline in operating expenses, as a percentage of sales, was due to the impact of the additional week.

Fiscal 2013

AutoZone reported earnings per share of $27.79 for fiscal 2013, up 18.3% from last year. Earnings surpassed the Zacks Consensus Estimate by 10 cents. Net income increased 9.3% to $1 billion from $930.4 million in the last year. Excluding the extra week, net income increased 6.7% year over year to $993.1 million and earnings increased 15.6% to $27.15. The company’s revenues went up 6.3% to $9.1 billion in fiscal 2013 from $8.6 billion a year ago.

Store Opening and Inventory

AutoZone opened 69 stores in the U.S. during the quarter. It also opened 21 stores in Mexico and two stores in Brazil. As of Aug 31, 2013, the company had 4,836 stores in 49 states in the U.S., the District of Columbia and Puerto Rico, 362 stores in Mexico and three stores in Brazil.

AutoZone’s inventory grew 8.9% in the quarter, driven by higher store count and continued strategic investments in hard parts assortment. Inventory per store increased 4.8% to $550,000 from $525,000 in the corresponding quarter last year.

Share Repurchase

During the quarter, AutoZone repurchased 1.3 million shares for $560 million, reflecting an average price of $428 per share. The company had $468 million worth of shares remaining for repurchase at the end of the fourth quarter.

Financial Details

AutoZone had cash and cash equivalents of $142.2 million as of Aug 31, 2013, up from $103.1 million as of Aug 25, 2012. Total debt amounted to $4.19 billion as of Aug 31, 2013, compared with $3.77 billion as of Aug 25, 2012. The company had a stockholder deficit of $1.69 billion as of Aug 31, 2013, up from $1.55 billion as of Aug 25, 2012.

During fiscal 2013, AutoZone generated net cash flow of $1 billion before share repurchases and changes in debt compared with $949.6 million in fiscal 2012. Capital spending increased to $414.5 million from $378.1 million in fiscal 2012.

Our Take

AutoZone is a prominent player in the automotive replacement parts and accessories industry along with Advance Auto Parts Inc. (AAP - Analyst Report), O’Reilly Automotive Inc. (ORLY - Analyst Report) and CarMax Inc. (KMX - Analyst Report). Currently, shares of the company retain a Zacks Rank #4 (Sell).

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