Q3 2011 Earnings Call
May 24, 2011 10:00 am ET
William Rhodes - Chairman of the Board, Chief Executive Officer and President
William Giles - Chief Financial Officer, Executive Vice President of Information Technology, Finance & Store Development and Treasurer
Unknown Executive -
John Lawrence - Morgan Keegan & Company, Inc.
Aram Rubinson - Nomura Securities Co. Ltd.
Greg Melich - ISI Group Inc.
Anthony Cristello - BB&T Capital Markets
Gary Balter - Crédit Suisse AG
Matthew Fassler - Goldman Sachs Group Inc.
Michael Lasser - Lehman Brothers
Christopher Horvers - JP Morgan Chase & Co
Simeon Gutman - Goldman Sachs
Colin McGranahan - Sanford C. Bernstein & Co., Inc.
Brian Nagel - Oppenheimer & Co. Inc.
Scot Ciccarelli - RBC Capital Markets, LLC
Previous Statements by AZO
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Welcome to the AutoZone conference call. [Operator Instructions] 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 second quarter financial results. Bill Rhodes, the company's Chairman, President and CEO, will be making a short presentation on the highlights of the quarter. The conference call will end promptly at 10 a.m. Central Time, 11 a.m. Eastern Time. Before Mr. Rhodes begins, the company has requested that you listen to the following statement regarding forward-looking statements.
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, positioned, strategy and similar expressions. These are based on assumptions and assessments made by our management in light of experience, 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.
Mr. Rhodes, you may now begin.
Good morning, and thank you for joining us today for AutoZone's Fiscal 2011 Third 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, Treasurer, Investor Relations and Tax.
Regarding the third quarter, I hope you've had an opportunity to read our press release and learn about the quarter's results. If not, the press release, along with slides complementing our comments today, is available on our website, www.autozoneinc.com. Please click on Quarterly Earnings Conference Calls to see them.
We are very pleased to announce another very strong quarter of performance financially and operationally. Our EPS for the third quarter increased by 28.5%, another exceptionally strong quarter for us as our domestic same-store sales increased 5.3%. This marks the 10th consecutive quarter of EPS growth in excess of 20% and the 19th consecutive quarter of double-digit EPS growth.
I'd like to start our call this morning by thanking all our AutoZoners across North America for their continued efforts on our 1TEAM Going the Extra Mile 2011 operating theme. We have made consistent progress on each of our initiatives, which include hiring, retaining and training the best AutoZoners, enhancing our hub network, leveraging the Internet, profitably growing Commercial and improving our product assortment and inventory management efforts. I'll go into more detail later on many of these initiatives.
Our focus remains on the fundamentals. We're committed to having the right AutoZoners providing the right customer service, along with the right products at the right price every day. Our past successes give us confidence that our strategies have and we'll continue to position AutoZone for continued growth both in sales and earnings in each of our businesses: Domestic Retail, Domestic Commercial, Mexico and ALLDATA.
Regarding our third quarter sales results, our Total Auto Parts segment, made up of both our Domestic and Mexico businesses, delivered an 8.5% increase. Our Other businesses made up of ALLDATA and E-Commerce were up 12.5%. According to NPD data provided to us, AutoZone continues to gain market share in both the domestic DIY and DIFM market segments. This data gives us great confidence in our strategies and their implementation and strengthens our commitment to staying the course. Existing customers and new customers are shopping with us because of the perceived value of their comprehensive experience with us. However, we know there are alternatives. That is why we focus on not only improving inventory coverage and our ability to say "yes" more frequently, but also on delivering trustworthy advice. In the end, it is our strong culture of providing WOW! Customer Service that differentiates us in the marketplace.
Over the last several quarters, not only have we delivered EPS growth in excess of 20% each quarter, we have increased our investments in areas we believe will drive long-term growth. We have continued to open new stores, both in the United States and Mexico, at a combined annual growth rate of approximately 4%. We've expanded our emphasis on hub store operations and are relocating or expanding many of our hub stores in order to ensure they have the physical capacity to execute the vision we have for them. We have made considerable investments on our Commercial business, expanding our sales force, improving our technology, opening new programs at an accelerating rate and increasing labor. We've also intensified our training efforts and added labor in other specific areas. Finally, we have continued to refine our merchandise placement efforts, adding more late model products while continually reducing less productive inventory.