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Why AutoZone’s Bottom Line Rose in Fiscal Q4 2018

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AutoZone’s fiscal Q4 2018 earnings

In the previous two parts, we saw how AutoZone’s (AZO) key business segments fared in the fiscal fourth quarter. The company’s continued focus on improving parts availability and the in-store experience helped it drive notable positive growth in its commercial segment. Now, let’s see how these factors affected AutoZone’s profitability in the fiscal fourth quarter.

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Fiscal Q4 2018 profitability

In the fiscal fourth quarter, AutoZone’s gross profit was $1.91 billion, about 2.9% higher than $1.85 billion in the fiscal fourth quarter of 2017. With this, the company’s gross margin came in at 53.6%, higher than 52.8% in the fiscal fourth quarter of 2017. In the fiscal third quarter, it reported a gross profit margin of 53.5%.

AutoZone’s adjusted net profit stood at $494.0 million in the fiscal fourth quarter, up 14.0% YoY (year-over-year) with a strong net profit margin of 13.9%. This was better than its adjusted net profit margin of 12.4% in the fiscal fourth quarter of 2017. AZO’s profit margin witnessed improvement primarily due to higher merchandise margins and the sale of the two business units in fiscal 2018.

The gross profit margins of auto part retailers such as AutoZone are much higher than those of mainstream automakers (XLY) General Motors (GM), Ford (F), and Fiat Chrysler (FCAU). This is primarily due to significantly higher fixed and operational costs involved in the auto manufacturing business. In the second quarter, GM, Ford, and FCAU reported adjusted gross profit margins of 18.2%, 7.6%, and 13.8%, respectively. 

In their most recent earnings results, AutoZone’s peers Advance Auto Parts (AAP) and O’Reilly Automotive (ORLY) reported adjusted gross margins of 43.7% and 52.5%, respectively.

Continue to the next part to learn about analysts’ expectations from AutoZone’s future earnings.

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