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Specialty retailer and distributor of automotive replacement parts and accessories

AutoZone's

(AZO) - Get Report

revenue for Q1 FY09 grew 1.6% to $1.48 billion from $1.46 billion a year ago, fueled by 0.7% growth in retail sales and 1.8% rise in commercial sales. Meanwhile, domestic same-store sales, or sales for stores open at least one year, decreased 1.5% during the quarter.

Segment-wise, Domestic Retail revenue increased marginally to $1.22 billion from $1.21 billion, on refining of its product assortments, along with updating its 14 merchandise assortments, which was partially offset by disruptions caused by hurricanes Gustav and Ike. Furthermore, Domestic Commercial revenue stood at $170.63 million compared to $167.57 million in the year-ago quarter. Looking at its operational metrics, sales per average store slipped 2.9% to $339,000 from $349,000, while sales per average square foot declined 3.6% to $53.00 from $55.00 in prior year's quarter. Furthermore, net inventory per store deteriorated 14.0% to $43,000 from $50,000 in Q1 FY08.

The company's gross profit margin improved 22 basis points to 52.85% from 52.63%, helped by ongoing category management efforts and supply chain efficiencies. Operating, selling, general, and administrative expenses inched up 2.8% to $502.65 million from $489.07 million. Subsequently, operating margin slipped 17 basis points to 16.14% from 16.31%.

Total interest expense rose 9.8% to $31.91 million from $29.05 million, thereby deteriorating the interest coverage ratio to 7.48 from 8.17. Furthermore, net income declined marginally to $131.37 million from $132.52 million during Q1 FY08, as the cost of sales increased 1.1% to $737.10 million. However, on a per share basis, earnings spiked 10.4% to $2.23 from $2.02, due to reduced share count in the latest quarter.

For the quarter ended Nov. 22, 2008, cash and cash equivalents increased 7.5% to $85.76 million from $79.81 million a year ago, while net operating cash flow declined 17.7% to $140.78 million from $171.05 million. Moreover, a quick ratio of 0.06 reflects the company's potential inability to cover its short-term liquidity requirements. Total debt edged up 5.0% to $2.27 billion from $2.16 billion; whereas shareholders' equity plunged 64.9% to $60.00 million from $171.05 million. As a result, the debt-to-equity ratio worsened to 37.80 from 12.63 a year ago. However, return on assets expanded 13 basis points to 12.53% from 12.40%, while return on equity swelled 71,421 basis points to 1,067.49% from 353.28% in the prior year's quarter.

During the latest first quarter, the company opened 30 new stores and replaced two stores, thereby taking the total store count to 4,122 in U.S. with a square footage of 26.44 million. Additionally, AZO opened two stores in Mexico, thereby pushing up the total store count to 150 in Mexico. Moreover, AutoZone repurchased 2.23 million shares of its common stock at an average price of $121.86 per share for $272.12 million.

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