AutoZone's Stock Is On Track For A Record High - AutoZone (NYSE:AZO), Amazon.com (NASDAQ:AMZN)

The auto parts retailer AutoZone Inc AZO published its quarterly results on Tuesday, December 10th, proudly showing its fifth straight quarter of double digit growth. Consequently, its stock surged 7% as fears of inhibitive pressures vanished with the company starting its fiscal year strong, on which it was congratulated by analysts.

First Quarter Of 2020 FY

Memphis-based auto parts retailer achieved net sales of $2.8 billion, exceeding the $2.6 billion from the same quarter of the previous fiscal year. Gross profit also increased from $1.4 billion in the first quarter of FY 2019 to $1.5 billion. EBIT also followed this pattern, increasing from $488 million to $500 million. Net income, however, dropped slightly from $351 million to $350 million. Basic net income per share amounted to $14.67 whereas diluted came to $14.30, both exceeding the ones from the comparable quarter last year.

The company opened 18 new U.S. stores with four additional ones of which two are in Mexico and the other two in Brazil, forming its footprint to 6,433 stores. Domestic sales increased 3.4 percent.

Possible Weaknesses

Despite exhibiting growth, the omnichannel still represents less than 5 percent of the company's overall business. During the earnings call, William C. Rhodes, the CEO, emphasized several times that retail is fighting a decline for the past 25 years but AutoZone managed to exhibit positive same stores growth for 21 years of that period. Despite having a record year (FY 2019), increased costs due to imposed tariffs will be passed on to consumers.

The next upcoming second quarter is, historically, the company's most volatile, both in positive and negative terms. But management is certain that this auto retailer will continue outperforming the industry. Although online sales still pose a challenge, gross margins have improved after contracting in the previous quarter, with many analysts expecting them to further decline.

Competitors

The company is indeed above its rivals, such as US Auto Parts Network PRTS was recently downgraded by Zacks Investment Research on December 8th, from ‘hold' to ‘sell'. The rival company reported its last earnings on November 1st, failing to miss Zacks' earnings estimate but exceeding those of revenue with $69.27 million as opposed to estimates of $67.38 million. But ultimately, the company had both a negative net margin of 3.88% as well as negative return on equity of 29.60%.

But then there's the well-established Genuine Parts Company GPC with a market capitalization of $14.99B which exhibited a decent share price growth over the past few months. And let's not forget the innovative solar pioneer of the car equipment industry, the tonneau-cover manufacturer Worksport Ltd, subsidiary of Franchise Holdings International FNHI who is successfully expanding its growing portfolio of intellectual property assets.

Besides posting record sales, gross profit and net income in its third quarter, the company's innovations are surely about to disrupt the specialized auto parts as well as the whole automotive industry.

Outlook

Management as well as investors are more than pleased with the company's performance and consistency with which it started the new fiscal year. The company's leaders believe that Brazil has the potential to be an even greater market than Mexico while also planning to add more hubs in the foreseeable future.

Management is also waiting to execute several IT efforts during the year that are supposed to enhance experiences of both consumers and employees alike. Shares are up 49% this year and by exceeding sales expectations by far for the most recent quarter, many fears were erased, such as the once thought one that the e-commerce giant Amazon.com, Inc. AMZN will diminish this auto-parts retailer.

By ‘checking all the boxes' with its quarterly results, the company has confirmed yet again it can co-exist with Amazon, and not just survive, but thrive!

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