Strong Q118, evidence of improvement
AZO reported a strong +2.3% comp (AE/consensus +1.2%/+0.9%), representing a sequential improvement for the second consecutive quarter and the strongest performance since Q216. Hurricane-related sales contributed 50-60bps of sales growth, while commercial sales grew +6.7% YoY (vs. +5.9% in Q417 and +3.6% in Q317). Gross margins were well managed (flat YoY), while inventory per store grew +2.5% YoY, broadly in-line with the comp. Operating margins missed by ~10bps, but this included ~35bps of hurricane-related expense. EPS was consequently 2.3% ahead, despite the hurricanes having a $0.07 negative impact. A strong quarter, demonstrating sequential improvement after the recent industry challenges.AutoZone is a retailer and a distributor of automotive replacement parts and accessories. The company operates stores in the United States, including Puerto Rico and Saint Thomas, Mexico, and Brazil. Each store carries a product line for cars, sport utility vehicles, vans and light trucks, including new and remanufactured automotive hard parts, maintenance items, accessories and non-automotive products. In addition, the company has a commercial sales program that provides commercial credit and delivery of parts and other products to local, regional and national repair garages, dealers, service stations and public sector accounts. The company also sells the ALLDATA brand automotive diagnostic and repair software.
Formed in 2003 by an established team from Cazenove, one of the most respected investment banks in the UK, Atlantic Equities conducts and publishes fundamental, bottom up research on mid and large cap US companies.
Atlantic provide order execution through a wide range of DMA products and algorithmic trading suites.
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