AutoZone, Inc. CEO Discusses F1Q2011 Results - Earnings Call Transcript
AutoZone, Inc. (AZO)
F1Q2011 Earnings Call
December 7, 2010 10:00 a.m. ET
Executives
Bill Rhodes - Chairman, President and CEO
Bill Giles - Executive Vice President and Chief Financial Officer, Store Development and IT
Brian Campbell - Vice President and Treasurer, Investor Relations and Tax
Analysts
Alan Rifkin - Bank of America
Greg Melich - ISI
Alan Hatzimanolis - BB&T Capital Markets
Aram Rubinson - Nomura Securities
John Lawrence - Morgan Keegan
Ivan Holman - CitiGroup
Scott Ciccarelli - RBC Capital Markets
Michael Lasser - Barclays
Matthew Fassler - Goldman Sachs
Mark Becks - JPMC
Presentation
Operator
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Good morning and welcome to the AutoZone conference call. Your lines have been placed on listen only until the question and answer session of the conference. Please be advised today’s call is being recorded. If you have any objections please disconnect at this time. This conference call will discuss AutoZone’s first quarter financial results.
Bill Rhodes, the company’s Chairman, President and CEO will make a short presentation on the highlights of the quarter. The conference call will end promptly at 10:00 am Central Time, 11:00 am Eastern Time. Before Mr. Rhodes begins the company has requested that you listen to the following statement regarding forward looking statements.
Unnamed Company Representative
Certain statements contained in this press release are forward-looking statements. Forward-looking statements typically use words such as believe, anticipate, should, intend, plan, will, expect, estimate, project, positions, strategy, and similar expressions. These are based on assumptions and assessments made by our management in light of experience and perception of historical trends, current conditions, expected future developments and other factors that we believe to be appropriate.
These forward-looking statements are subject to a number of risks and uncertainties including without limitation credit market conditions, the impact of recessionary conditions, competition, product demand, the ability to hire and retain qualified employees, consumer debt levels, inflation, weather, raw material costs of our suppliers, energy prices, war and the prospect of war including terrorist activity, availability of consumer transportation, construction delays, access to available and feasible financing and changes in laws or regulations.
Certain of these risks are discussed in more detail in the risk factors section contained in Item 1A under Part 1 of our Annual Report on Form 10-K for the year ended August 28, 2010 and these risk factors should be read carefully.
Operator
Thank you. Mr. Rhodes, you may now begin.
Bill Rhodes
Good morning and thank you for joining us today for AutoZone’s fiscal 2011 first quarter conference call. With me today are Bill Giles, Executive Vice President and Chief Financial Officer, Store Development and IT, and Brian Campbell, Vice President and Treasurer, Investor Relations and Tax.
Regarding the first quarter, I hope you have had an opportunity to read our press release and to learn about the quarter’s results. If not, the press release along with slides complementing our comments today is available on our Web site, www.autozoneinc.com. Please click on quarterly earnings conference calls to see them. We are very pleased to announce a strong start to our fiscal year with an increase in EPS for the first quarter of 33.7% and a domestic same store sales increase of 9-1/2%.
This marks the eighth consecutive quarter of EPS growth in excess of 20% and the 17th consecutive quarter of double digit EPS growth. Just eight weeks ago during our fourth quarter conference call we highlighted our operating theme for 2011, one team going the extra mile, and outlined the key elements in making that theme a reality. This morning we will update you on our progress on these initiatives and give some color on the opportunities and obstacles we may face for the balance of the year. Along the way we’ll address what we have learned.
First I want to congratulate our entire organization on another very impressive performance in the first quarter. Our sales results accelerated this past quarter in both retail and commercial and a key contributor to that acceleration was the execution levels of our organization across the board. On both a two-year and three-year comp store stacked basis our trends accelerated and we continued to gain share in both commercial and retail in virtually every geographic area of the country.
As you know, our retail sales represent the largest percentage mix to our overall sales. According to third party statistics our share of the addressable $40 billion plus retail segment has grown consistently over the last couple of years. To me it’s quite impressive that we have continued to consistently gain share year over year in the retail business as the market leader. Obviously this has been our strength historically and let me assure you that we will never take our eye off of this important ball nor will we ever take our position as the market leader for granted.
Regarding commercial, this quarter followed on last quarter’s 20% plus growth with sales growth of 21%. This marks our 14th straight quarter of sequential improvement in commercial sales growth. While yes, we gained share in this sector as well, it still represents only 12.4% of our overall sales, up from 11.6% this time last year. Today it is a substantially smaller percentage of the business than retail but it is important to remember that the commercial sector of the industry is substantially larger than the retail sector, approximately 30% bigger.
Many of our competitors have stated specific goals on how they want to see their mix of sales between commercial and retail. We have elected not to have such a stated goal as we don’t believe the size of sales in either business has a material impact on the other sector except that the higher our combined sales, the better we can leverage our expenses and assets. The bottom line is we don’t want to put any false constraints on our opportunities in either retail or commercial.
We have tremendous opportunities in both and we will aggressively pursue both. As validated by the continued acceleration in our commercial sales growth, we are quite pleased with the strategies and tactics that we have developed over the last several years and believe we are on track to build a strong sustainable business for the long term. During the quarter we opened 54 programs. We now have commercial programs in 50% of our stores, up from 54% last year. Additionally, our other business, all data and e-commerce, had a fine quarter, up over 11% in sales from this time last year.
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