AutoZone Slides on Cautious Outlook (Update)

AutoZone turns in strong quarterly results, but the CEO's cautious remarks about future sales growth weighs on the stock.
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Updated from 10:09 a.m. EDT

There was a congratulatory air about

AutoZone's

(AZO) - Get Report

latest quarterly earnings release Wednesday, but some cautionary remarks in a conference call later on appeared to weigh on the company's stock price.

The car-parts retailer has been one of those businesses that the recession has evidently helped. Stung by tough times, consumers have been shunning the purchase of new cars and choosing instead to repair their old ones -- just like '57 Chevys in Cuba.

The company was sure to point out in its earnings release that this was its eleventh consecutive period of double-digit EPS growth. Fiscal third-quarter profit came in at $173.7 million, or $3.13 a share. That's 26% more than the year-ago period's $158.6 million, or $2.49 a share, and better than analysts' expectations of $2.89 a share.

Sales rose 9.3% to $1.7 billion. Growth as measured by same-store sales was 7.4% year-over-year.

In a conference call to discuss earnings Wednesday, however, the company's chief executive, Bill Rhodes, told analysts not to expect such vigorous same-store sales expansion in the quarters to come. "It's not consistent with historical trends," he said, adding that 4% was the "normalized" rate for the industry and thus more in line with what to expect in the future.

Though Rhodes stopped short of giving any specific guidance, his tentative comments about sales growth rates seemed to dampen AutoZone's stock price, despite the apparently strong quarter otherwise.

AutoZones shares were trading recently at $155, down 5%, or $7.84, on triple the daily average volume. Ahead of the earnings release, the stock had jumped 5% during Tuesday's session. It's now trading below its 52-week high, about $170, which it reached about a month ago.

As for other metrics, the company said inventory during the third quarter was 6% higher than it was in the year-ago period, while gross profit as a percentage of sales was about 50%, flat with last year.

Other parts retailers have been posting banner results as well.

Advanced Auto Parts

(AAP) - Get Report

bested Wall Street forecasts with its first quarter results, released last week. And

O'Reilly Automotive

(ORLY) - Get Report

posted stronger-than-expected results, including a 36% jump in earnings.

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