We last bought Memphis-based AutoZone (AZO) in October and sold in December, notes David Fried, a specialist in stock buybacks and editor of aptly named, The Buyback Letter.
We’ve owned and sold the stock a handful of times in the past 15 years, sometimes with spectacular results (a 35.89% gain from a 2010 purchase).
AutoZone is the nation's leading retailer and a leading distributor of automotive replacement parts and accessories, with 6,657 stores in the U.S., Puerto Rico, Mexico and Brazil.
It operates in the Do-It-Yourself (“DIY”) retail, Do-It-for-Me (“DIFM”) auto parts and products markets. Each store carries an extensive line for cars, sport utility vehicles, vans and light trucks, including new and remanufactured hard parts, maintenance items and accessories.
Since opening its first store in 1979, AutoZone has joined the New York Stock Exchange and earned a spot in the Fortune 500. It has more than 90,000 employees it calls “AutoZoners.”
It’s been one of our favorite companies over the years because it makes money and grows profits. It’s also been praised as being incredibly resilient, even with the challenges of the last year.
Spurred by the pandemic, consumers have been committed to keeping their vehicles running and looking good, which has been in AZO’s favor as customers took on many DIY projects. Americans bought up used cars to avoid mass transit and ride-sharing services.
More used cars on the road continues to bode well for AZO, which offers customers everything they need for home-based vehicle maintenance and repairs. The average car driven on U.S. roads is a surprising 11.9 years old, according to the Bureau of Transportation Statistics.
To keep their cars in good condition and protect their expensive investment, consumers must spend a little more than they might have in the past -- on a per-mile-driven basis, auto maintenance and repair spending in 2020 was up 124% from 2019's levels.
AutoZone pays no dividend (share appreciation and buybacks are their methods of rewarding investors), and over the last 3 or so years, shares gained more than 100% in value.
Q3 earnings showed $26.48 per share (up from $14.39 from prior-year Q3 earnings). Net income climbed 73.9% year over year to $596.2 million. Net sales also increased 31.4% year over year to $3,651 million.
Gross profit increased to $1,914.9 million from the prior-year quarter’s $1,490.6 million. Operating profit also increased to $803.5 million from $491.7 million in the year-earlier period. The company opened 2 stores in the U.S., 7 in Mexico and 1 in Brazil. It was a busy quarter.
AutoZone historically has long been an active and committed repurchaser, so much so that financial pundits have joked that it sometimes looks like the company is taking itself private on an installment plan.
For Q3, AZO repurchased 663,328 shares for $900 million; the company has shares worth $1.3 billion remaining in the current repurchase authorization. AutoZone continues on the buyback road, having reduced shares outstanding by 7.738% in the last 12 months.
