AutoZone Stock Tanks: Lackluster Third-Quarter Comp Sales



AutoZone’s third-quarter earnings

The largest US auto parts retailer by store count, AutoZone (AZO), released its fiscal Q3 2018 earnings today before the market opened. The company’s third fiscal quarter covered the 12 weeks that ended on May 5. AZO’s third-quarter adjusted earnings rose 17% year-over-year to $13.42 per share, beating Wall Street’s consensus estimates of $12.97 per share.

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What disappointed management

AutoZone’s sales underwent 1.6% year-over-year growth—far better than its direct peer (XLY), Advance Auto Parts’ (AAP), fiscal first quarter, which had ended on April 21. AAP reported a 0.6% year-over-year decline in sales in an earnings report released earlier today.

In its third fiscal quarter, AutoZone’s same-store sales or comps rose 0.6%—which was better than the 0.8% decline it registered a year ago. AZO’s comp growth rate was much better last quarter, at 2.2%.

During the third fiscal quarter earnings conference call, AutoZone’s CEO, William Rhodes, mentioned that he’s “disappointed with our sales for the quarter.” However, Rhodes added that this sales growth was “in line with our expectations from week to week based on the weather patterns we were experiencing.”

A sequential decline in AutoZone’s comp sales growth rate and management’s disappointment could be the key reasons why the stock tanked today. AZO was trading with massive losses of 8.3% for the session as of 1:50 PM EST.

On the positive side, the company’s third-quarter gross margin improved to 53.5%, compared to 52.6% a year ago. Likewise, AutoZone’s adjusted EBIT expanded to 20.5% from 20.2%, partly due to improved merchandise margins.

Auto Industry earnings season

See Advance Auto Parts’ Sales Fell for the Third Consecutive Quarter to learn more about its release earlier today.

The major automakers General Motors (GM), Ford (F), Fiat Chrysler (FCAU), and Tesla (TSLA) have already announced their results in the last month. Please visit Market Realist’s Autos page for detailed reviews of auto companies’ earnings.

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