uploads/2019/01/AZO-3-1.png

What Could Drive AutoZone’s Top Line in 2019?

By

Updated

Future expectations

AutoZone (AZO) is one of the best-known auto parts retailers in the United States. For the second quarter of fiscal 2019, Wall Street analysts expect AutoZone’s sales to rise 1.6% YoY (year-over-year) to $2.45 billion. For fiscal 2019, analysts forecast sales growth of 5.1% YoY to $11.79 billion. However, for fiscal 2020, analysts expect sales to report an increase of 2.1% to $12.0 billion on a YoY basis.

However, AutoZone’s management hasn’t provided a sales outlook for fiscal 2019. Management remains confident of the industry’s prospects for the current year and after that. On the first quarter of fiscal 2019 conference call, CEO Bill Rhodes stated, “With the aging of the car population and recently lower gas prices at the pump, these are contributing to our optimism regarding 2019 for both DIY and commercial.”

AutoZone’s first quarter of fiscal 2019 sales of $2.64 billion marginally beat estimates but grew 2% YoY. Domestic same-store sales increased 2.7%.

Growth drivers

The company’s top line is cushioned by store openings. In fiscal 2018, the company opened 153 net new stores. In the first quarter of the fiscal year, the company opened 13 new stores. As of November 17, the company had about 5,631 domestic stores along with 567 stores in Mexico and another 20 stores in Brazil.

It’s also focusing on mega hubs. For fiscal 2019, AutoZone has projected ten mega hub openings. Mega hubs are the retailer’s larger stores, where it usually stocks more SKUs products, ranging from 80,000 to 100,000. The company opened two new mega hubs in the fiscal first quarter of 2019. AutoZone had 26 mega hubs at the end of the first quarter of the fiscal year.

AutoZone is also investing in its digital platform—especially its omnichannel capabilities. The company has facilities in place—like buy online, pick up in-store, ship to home, and next-day delivery.

Expectations for peers

For fiscal 2018, analysts forecast Advance Auto Parts (AAP) sales growth at 2.2% YoY to $9.58 billion. For O’ Reilly’s Automotive (ORLY) fiscal 2018, analysts project top-line growth of 6.4% YoY to $9.55 billion.

More From Market Realist