I remain upbeat about the shares of AutoZone (AZO), one of the US leading specialty retailers of automotive replacement parts and accessories. Recently, the company posted decent financials for its fiscal 2016 fourth quarter ended August 27. Revenues increased 3.3% y-o-y to $3.40 bn, mostly in line with consensus estimate. Domestic same-store sales (sales for stores open at least for one year) grew 1% in the quarter. Operating profit rose 5.1% to $703.4 mn, and operating margin improved 40 basis points to 20.7%. Adjusted earnings per share jumped 12.2% to $14.30 surpassing analysts’ average projection by a penny. For full fiscal year 2016, the company reported EPS of $40.70 (growth of 13%) on revenues of $10.64 bn (up 4.4%). AutoZone repurchased 1.9 mn shares for $1.45 bn during FY2016 and had shares worth $395 mn remaining for repurchase at the end of the year.
During the reported quarter, AutoZone opened 71 new stores in the US, 25 stores in Mexico, and one Interamerican Motor Corporation (IMC) branch. Additionally, it relocated 2 stores in the US. As of August 27, the company had 5,297 stores in 50 states in the US, the District of Columbia and Puerto Rico, 483 stores in Mexico, 26 IMC branches, and eight stores in Brazil for a total count of 5,814.
Aging vehicle fleet in the US as well as lower gas prices and higher employment, which have American drivers putting more miles on their cars, are expected to support strong demand for replacement parts. That trend may cause auto-part consumption to grow 3-4% for the next four years, experts say. These factors combined with AutoZone's recent inventory initiatives aimed at improving parts availability, we believe, will bode well for the company’s sales going forward. We also expect the company to remains focused on enhancing shareholder returns given its solid cash flow generating capabilities.
Shares of AutoZone are trading above $760 resistance level as well as 50-day moving average. The stock, I expect, will continue to rise, with medium-term goal at $850.