couple of auto parts retailers are trading higher today after reporting strong
earnings results: Advanced Auto Parts (AAP) and AutoZone (AZO).
For AAP, non-GAAP EPS rose 31% year/year to $2.10, which was a good bit better than expected. Revenue fell 0.6% year/year to $2.87 bln, which was a bit light of market expectations. Same store comps declined -0.8%. For AutoZone, EPS rose 17% year/year to $13.42, which was well ahead of market expectations. Revenue rose 1.6% year/year to $2.66 bln.
AZO says it was optimistic as it entered the quarter since the US was coming off the first reasonably severe winter in the last three years. Cold winters are good for auto parts retailers. Unfortunately, there was also a very cold, wet spring through March and much of April and AZO's sales did not respond until spring-like weather arrived in late April. When the conditions improved, AZO's performance improved significantly which reinforces its optimism about the balance of the selling season.
These results are pretty consistent with the Q1 report from O'Reilly Auto (ORLY), which was released in late April. That stock has been making a strong move since then. Despite the strong ORLY report, both of these stocks (AAP, AZO) have been fairly weak over the past few months. Perhaps these earnings reports will act as a spark plug to get them going again.
From an overall perspective, these stocks have been pretty much up and down in recent years. Part of this movement is due to the challenge coming from online auto parts retailers which is impacting the brick-and-mortar retailers. This has resulted in some lackluster comp numbers in recent quarters.
Also, in our view, with auto parts retailers being every few blocks, there seem to be almost too many store locations and this is over-saturating the market. With that said, AAP and AZO reported good results this morning.
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