AutoZone (AZO 707.47, -28.43) has given up 3.9% in pre-market after missing earnings expectations.
The auto parts retailer reported below-consensus second quarter earnings of $8.47 per share on a 5.4% year-over-year increase in revenue to $2.41 billion, which was just ahead of market estimates.
Gross margin improved to 52.9% from 52.7% one year ago due to lower distribution costs and higher merchandise margins. Operating expenses rose to 44.4% of sales from 35.9% of sales one year ago. The increase was due to higher incentive compensation, higher advertising, and deleverage and occupancy costs.
Domestic same store sales rose 2.2% year-over-year. Total auto parts sales grew 5.7% year-over-year to $2.33 billion while Domestic commercial sales grew 5.7% to $455.94 million.
Inventory grew 4.7% year-over-year due to new stores and increased product placement. Inventory per location increased to $671,000 from $665,000 one year ago. Net inventory on a per-location basis was reported at -$46,000, down from -$36,000 one year ago. Inventory turnover declined to 1.3x from 1.4x one year ago.
After conducting an internal review, the company decided to sell IMC and AutoAnything businesses, because they no longer fit the company's core strategy.
AutoZone opened 35 new U.S. stores during the second quarter while closing one location. Three new stores were opened in Mexico while two new stores were opened in Brazil. The company ended the quarter with 5,514 U.S. stores in its portfolio. The company has 532 stores in Mexico, 26 IMC branches and 16 stores in Brazil.