AutoZone Conference Call Highlights

reported its Q3 earnings this week. Shares of the company were up 4 percent. Below are some key highlights from its conference call.

• This past quarter, our U.S. retail business expanded with the opening of 22 new stores. • We also opened 61 net new commercial programs. • Our commercial business continued to gain traction growing sales 13% for the quarter. • We now have commercial programs in 78% of our domestic stores, having opened 816 new programs in just the past two years. • And we have opened four new stores in Mexico during the quarter. • In Brazil, we continue to operate five stores and expect to open a couple of new ones over the next few months. • We currently have approximately 8% of our total stores outside of the United States. • We reported a same store sales increase of 4.5%, up from 2.1% in Q4 of last year. • We were pleased to see we gained traction in sales categories where we've added merchandise. • Our commercial business benefited from both the inventory additions and the diligent focus on growing sales in our older programs with particular emphasis on mature customers. • We were pleased with our sales performance throughout the quarter, but our DIY business was particularly strong in the last two weeks when much of the country experienced the first significant cold weather spell. • Our results were also generally consistent across all regions of the country. • While the weather experienced at the end of the quarter accelerated our growth even further. • Our sales throughout the quarter were noticeably improved from Q4 in virtually every week. • Our sales increased 8% and our domestic same store sales were up 4.5%. • As mentioned previously, our sales improved significantly from Q4 and each month both retail and commercial experienced positive same store sales growth. • Our expectation is we will continue to open new programs and grow our percentage of stores with the commercial program although our pace of growth will likely moderate. • We expect to open approximately 300 programs this year versus 424 last year. • We should also highlight another strong performance in return on invested capital as we were able to finish Q1 at 31.7%. • Regarding macro trends during the quarter, nationally unleaded gas prices started out at $3.46 a gallon and ended the quarter at $2.82 a gallon, a $0.64 decrease. • Last year, gas prices decreased $0.31 per gallon during the first quarter starting at $3.60 and ending at $3.29 a gallon. • For the quarter, commercial sales increased 13%. Commercial represented 17% of our total sales and grew $45 million over last year's Q1. • For the quarter, our tax rate was approximately 35.9%, down slightly from last year's first quarter. • Net income for the quarter was $238 million, up 9.3%. Our diluted share count of 32.8 million was down 5.5% from last year's first quarter. • The combination of these factors drove earnings per share for the quarter to $7.27, up 15.6% over the prior year's first quarter. • With our excess cash flow, we repurchased $300 million of AutoZone's stock in the first quarter. • At the end of the quarter, we had $570 million remaining under our share buyback authorization and our leverage metric was 2.5 times. • We reported an inventory balance of $3.3 billion, up 11% versus the Q1 ending balance last year. • Increased inventory reflects the recent IMC acquisition, new store growth and additional investments in coverage. • Inventory per store was up 6.7% at $604,000 per store. • Domestic same store sales, or sales for stores opened more than one year, were up 4.5% for the quarter. • Gross margin for the quarter was 52.1% of sales, up 20 basis points.