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Could AutoZone’s Slowing Sales Growth Be Worrisome?

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May. 25 2018, Updated 3:18 p.m. ET

AutoZone’s business

Tennessee-based AutoZone (AZO) earns its revenue by selling auto parts and accessories primarily in the United States, Puerto Rico, Mexico, and Brazil. In 2016, US auto companies (XLY) General Motors (GM) and Ford (F) benefited from strong US demand for utility vehicles and trucks. This positive trend in US auto demand also boosted growth potential for US auto parts sellers such as AutoZone, Advance Auto Parts (AAP), and O’Reilly Automotive (ORLY). In this part, we’ll look at AutoZone’s fiscal third-quarter revenue.

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AutoZone’s fiscal Q3 revenue

In the third fiscal quarter, AutoZone’s revenue rose 1.6% YoY (year-over-year) to $2.7 billion. Its same-store sales grew 0.6%, less than the 2.2% reported in the previous quarter but a YoY improvement from -0.8%.

During AutoZone’s third-quarter conference call, CEO Bill Rhodes stated 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.” In the last few quarters, AZO has been collecting data on its customers’ shopping patterns, which could help it offer a more customized shopping experience in the future.

Mega Hub update

During the conference call, management noted that Mega Hubs allow them to maintain an inventory of hard-to-find auto parts and gives AZO an edge over competitors. AutoZone opened three new Mega Hubs in the third fiscal quarter, bringing its store count to 21. By the end of the fourth fiscal quarter, the company plans to expand its Mega Hub count to 25. Continue to the next part, where we’ll explore how AutoZone’s key business segments performed in the third fiscal quarter.

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