Weather Woes At AutoZone As Comp Sales Decelerate

AutoZone, Inc. AZO reported EPS for Q4 2016 in line with expectations, despite the decline in comparable store sales, which in turn was due to the mild winter.

Baird’s Craig R. Kennison maintained a Neutral rating on the company, with a price target of $850.

Weather Woes

“Trends accelerated as the quarter progressed, as hot end-of-summer weather benefitted demand. Management is encouraged by recent trends and expects better top-line growth in F2017, as recent investments in part availability gain traction,” Kennison mentioned.

AutoZone reported its EPS for Q4 in line with the consensus forecast, despite a shortfall in same store sales, which the management attributed to the impact of weather in key regions.

However, the comp trends improved as the quarter progressed, with the hotter weather at the end of summer driving demand for heat-related parts. This helped offset some of the impact of a milder winter.

“Similar to last quarter, the Northeast, Midwest, and Mid-Atlantic regions continued to underperform, with comp performance trailing the broader store base by over 400bp,” the analyst noted.

Commercial Sales

In addition, commercial sales decelerated to 5.2 percent, with AutoZone holding only 3 percent share of the $74 billion commercial market for auto parts.

With room for the company to grow in this market, Kennison believes that the company’s strategy “increases replenishment frequency and expands the mega-hub network – all in an effort to drive better part availability.”

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