AutoZone (AZO 605.50, -53.99) has plunged 8.2% in pre-market after reporting disappointing results for the third quarter.
The auto parts retailer reported below-consensus third quarter earnings of $11.44 per share on a 1.0% year-over-year increase in revenue to $2.62 billion, which also missed estimates.
AutoZone's revenue drop was driven by an 0.8% decline in domestic store sales.
Total Auto Parts sales increased 1.1% year-over-year to $2.53 billion while total Domestic Commercial sales grew 3.6% year-over-year to $498.58 million. All Other sales fell 2.5% year-over-year to $88.32 million.
Gross margin declined by 21 basis points year-over-year to 52.6%. Higher supply chain costs associated with current year inventory initiatives and higher inventory shrink results were partially offset by lower acquisition costs.
Inventory increased by 7.3% year-over-year due to new stores and increased product placement. Inventory per location increased to $653,000 from $629,000 one year ago, but was down from $665,000 during the previous quarter.
The company pointed out that its quarter got off to a slow start, due in part to a delay in IRS tax refunds. Sales improved during the second half of the quarter, but not enough to offset the disappointing start.
AutoZone opened 35 U.S. locations during the quarter and relocated two others while eight new stores were opened in Mexico. The retailer ended the quarter with 5,381 locations in the 50 U.S. states, D.C., and Puerto Rico; 499 locations in Mexico; 26 IMC locations; and nine stores in Brazil.